Take up the dance! - Découvrir la...

Setting the rhythm!“We do not inherit the earth from our ancestors: we borrow it from our children.”

Native American proverb

Take up the dance!Annual Repor t 2009

Head OfficeLa Coop fédérée9001 de l’Acadie BlvdSuite 200Montréal, Québec H4N 3H7

Telephone: 514 384-6450Fax: 514 858-2025

Websitewww.lacoop.coop

On peut obtenir la version française de ce rapport sur le site Internet de La Coop fédérée à l’adresse www.lacoop.coop ou obtenir une copie imprimée en communiquant avec le Service des communications au 514 384-6450, poste 3484.

Artistic Director/Graphic DesignerBernard DiamantInfographiePierre CadoretService de la publicité et de l’infographieLa Coop fédérée

Photo Credits Martine Doyon, Photographer (www.martinedoyon.com) Valérie Laliberté, Assistant

Colour Separation and Printing Imprimerie Mont-Roy

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Contents

Take up the dance!Dance is the focal point of this year’s Annual Report and Annual General Meeting. The financial report is more than a corporate document with no vision and no soul, and the annual meeting is more than a review of shareholder profit.

La Coop fédérée invites you to take up the dance. To be part of an established business and a dynamic network that measures everything it does against the guiding principles of respect, equity and commitment.

The first dance!To build the future and to honour the past, La Coop fédérée has the financial strength to support a passionate new generation of young agricultural producers.

Dancing to the rhythm of your dreams!La Coop fédérée has been anchored in the daily life of agricultural producers in Québec since its inception 88 years ago. Economic growth, social responsibility, ethical practices and environmental protection are its core values. The soundness of its business model is demonstrated by the ability of its network to meet the distinct needs of its clients across Québec. A winning formula, a sustainable formula. A formula that 90,000 members farmers and individuals across a hundred cooperatives apply to generate, share and grow wealth.

Dancing to a world beat!This dance, set to the rhythms of the world, is enriched by the diversity of the cultural communities that make up our society. They are the wellspring of La Coop fédérée’s future. New bonds are formed, giving rise to new ideas, new products and services from near and far. Business opportunities for our agricultural producers abound.

Dancing in harmony! From the earth to the kitchen table, from the earth to the boardroom tables of your cooperatives: you are tens of thousands members strong. Every day, as you grow your businesses and your network to meet consumer needs and tastes, you are part of the dance, you weave the steps.

It’s up to you. Take the first step, feel the beat – take up the dance. Put your creativity to work and build the future. For agriculture and for the cooperative movement.

Take up the dance!Together, we will build the future. Take up the dance with La Coop’s network and our sure steps will weave a strong tomorrow.

Dancing to the rhythm of your dreams!The ideal partner to take up the dance and weave great ideas, big or small, revolutionary or traditional, La Coop’s network is always there with customized service to meet evolving client needs.

Dancing to a world beat!La Coop’s network moves to the rhythms of the world, a cultural diversity that enriches our agricultural heritage.

Dancing in harmony!La Coop’s network, in tune with today’s consumer.

2 President’s Message

12 Cooperative Overview

18 Management Discussion and Analysis

30 Olymel Overview

38 Management Report

39 Auditors’ Report

40 Consolidated Balance Sheet

41 Consolidated Statement of Earnings and Reserve 41 Consolidated Statement of Comprehensive Income

42 Consolidated Statement of Cash Flows

43 Notes to Consolidated Financial Statements 69 Financial Review

70 List of Locations

71 Affiliated Cooperatives

Annual Report 2009 - La Coop fédérée

Our OrganizationLa Coop fédérée contributes to the economic, social and environmental development of cooperative agricultural producers and its affiliated cooperatives by:

Developing an integrated cooperative network owned and operated by member agricultural producers to supply professional use products and services;

Operating a network of complementary businesses controlled by them that generate competitive earnings, primarily in the hardware, energy and meat processing sectors;

Enabling member producers to join together in democratically coordinating the value added production chain they are part of;

Promoting cooperative education and bringing cooperative values to life.

Annual Report 2009 - La Coop fédérée—2—

President's Message

—3—Annual Report 2009 - La Coop fédérée

The first dance!

President's M

essage

Together, we will build the future.

Take up the dance with La Coop’s

network and our sure steps will

weave a strong tomorrow.


Presi

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Messa

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Ghislain Cloutier1st Vice-president and Executive Committee Member

Laurent Bousquet2nd Vice-president and Executive Committee Member

Denis RichardPresident and Executive Committee Member


SATISFACTORY RESULTSVolatility and economic gloom persisted in 2009 but

La Coop fédérée held its own and posted satisfactory

results.

We ended the fiscal year with sales totalling approximately

$3.9 billion, reflecting price deflation for several inputs, partly

offset by higher sales volumes across most of our sectors.

Although lower than the exceptional results reported a year ago,

net contribution amounted to $53.3 million, demonstrating the

soundness of La Coop network’s business model.

La Coop’s operating results showed sustained growth, also

reflected in stronger performance by several affiliated

cooperatives of La Coop.

This improved operating performance is attributed to new

business lines, higher sales in our traditional markets and

partial implementation of the Chrysalide Project.

Meat processing operations produced acceptable results

under the prevailing economic conditions and should improve

in coming years, making it possible to meet the growth targets

expected by the Board of Directors of La Coop fédérée.

I was surprised to note that in total almost 60% of La Coop

results are now generated from operations with non-members

and non-agricultural businesses. The contributions to results

made by these operations provide considerable support to our

member producers.

A winning formulaLa Coop’s sound results are due in part to its cooperative structure,

which brings a certain stability. Recent studies in Québec have

shown that the cooperative business model is far more resilient

than its business corporation counterpart.

We knew that the cooperative model was better suited for our

local economies given its community roots and less alienating

structure. We now know that, on average, cooperatives last

longer than private businesses.

The recent economic crisis has shown that as cooperatives

are not subject to stock market-related pressures, they are more

stable and less vulnerable to financial crises.

For instance, US credit unions, which are equivalent to our

caisses populaires, are among the rare institutions that did not

seek government bailouts to deal with the crisis triggered by

excessive risk taken on by their private sector competitors.

President's M

essage

La Coop’s sound results are

due in part to its cooperative

structure, which brings a

certain stability.


Presi

dent's

Messa

ge

Across the world, mutual organizations and financial

cooperatives have attracted an increasing number of members

seeking greater financial stability.

And regardless of what media coverage of cooperatives

might lead us to believe, the world cooperative movement is

not something marginal. Recent data from the International

Cooperative Alliance shows that there are 750,000 cooperatives

around the world with 800 million members.

Three hundred of the largest cooperatives generate aggregate

sales equivalent to the GDP of countries like Canada or Spain.

As these 300 largest cooperatives include nine Canadian

cooperatives and mutual organizations of which five are located

in Québec, the province is well placed to promote ethical

business practices both nationally and internationally.

2008-2009 highlightsThe past fiscal year began with the completion of one of the

largest transactions ever carried out by La Coop fédérée in it’s

Supply Operations.

Against a backdrop of extremely high volatility in agriculture

fertilizer prices, La Coop fédérée took a calculated risk, in line

with its strategic vision, to acquire Agronomy Company of

Canada Ltd.

Marc A. TurcotteExecutive Committee Member

Bertrand ComeauAudit Commitee Member

Luc ForgetExecutive Committee Member

Charles ProulxAudit Commitee Member

Claude G. Couture

Conrad Robitaille Damien LemireAudit Commitee Member


President's M

essage

Claude Couture Normand MarcilAudit Commitee Member

Sophie Bédard Françoise MongrainAudit Commitee Member

Marc Quesnel

With this crop produce distribution network based mainly

in south-western Ontario and the Maritime Provinces, La Coop

has become a major player in crop production inputs

distribution in Eastern Canada.

The transaction is already proving profitable and synergies

to be established with our other activities are only just emerging.

As well as enhancing La Coop fédérée results, this acquisition

should allow La Coop’s network to improve its competitive

position and that of its member producers.

Despite the favourable news in the Crop Production Sector,

our Québec fertilizer distribution operations experienced a

rather challenging season.

Similarly to other major fertilizer distributors that need

to guarantee product availability early in the spring, La Coop

fédérée bought a high proportion of its fertilizer supply before

the closing of the seaway at a time when fertilizer prices were

pushed up to record levels by rising oil prices.

In spring, when fertilizers were distributed, prices had

dropped substantially, leading to expectations of equally

reduced prices by our members and clients.

As a result, La Coop fédérée and several affiliated cooperatives

recorded considerable losses. An adjustment program was

quickly implemented at the request of the Board of Directors of

La Coop fédérée to mitigate the impact on cooperatives operating

in the fertilizer trade. At the same time, we made sure to comply

with our obligation to treat all cooperatives equally.

Prési

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Messa

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We also carried out an in-depth review of our marketing

strategies in the fertilizer sector to better meet the needs of our

coop producers.

New investments were also earmarked for Côte-Sainte-

Catherine to meet the specific needs of the high-volume

producer market segment.

We are convinced that the measures initiated by La Coop

fédérée will enable all cooperatives in the Crop Production

Sector to perform well in their respective markets in the current

fiscal year.

The highlights of La Coop fédérée’s past fiscal year include

the coming into force of a new pork marketing agreement in

Québec.

In December 2008, Olymel signed a new marketing agreement

that implemented a new model guaranteeing in particular

US benchmark slaughtering prices for hog producers. This new

agreement came into full effect only in September 2009.

Concluded after long negotiations, the agreement is part

of a new approach that allows direct communication between

processors and producers, an essential condition for creating

a value chain in this sector, which has been severely tested in

recent years.

Teams of representatives of La Coop’s network and Olymel

are already at work to enhance the added value of La Coop

certified pork and on ways to link compensation of member

producers more directly to results of slaughtering and processing

operations.

In another sector of importance for its network and in part-

nership with several affiliated cooperatives, La Coop continued

to develop the hardware and construction materials network

during the past fiscal year.

Several stores were expanded or renovated, other businesses,

including a large wholesaler were acquired in the Québec City

area, and several independent franchisees became part of the

Unimat banner in 2009.

We also launched the new Unimat banner as part of the

global reworking of our brand architecture that also includes

the rollout of the new La Coop banner. To date, a considerable

number of stores have switched to the new Unimat banner and

the new La Coop banner should be rolled out soon.

Our decision to consolidate our hardware offering under

a single banner enabled us to increase the effectiveness

of circulars and to launch a TV advertising campaign in

September. The campaign will continue in 2010 and should

have a significant impact on the entire cooperative network.

I am convinced that these strategic investments will

strengthen the increasing involvement of cooperatives in this

important sector of our regional economies.

Chrysalide projectA review of the past fiscal year would not be complete

without an update on the largest reorganization project of

the agricultural cooperative movement in recent decades.

At the end of fiscal 2007-2008, cooperatives in La Coop’s

network operating in the Animal Production Sector boldly and

unanimously adopted an extensive reorganization project to

A review of the past fiscal year would

not be complete without an update on

the largest reorganization project of

the agricultural cooperative movement

in recent decades.

Message du président

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President's M

essage

We must keep in mind that the coming year will be a defining one for the Chrysalide Project in the Animal Production sector as the total expected savings will be generated once the final project components such as plant and input pooling and concentrating processing volumes in selected plants are implemented.

pool animal feed production assets that would generate

recurring savings of over $30 million.

A project of such scale involving a large number of stakeholders

requires careful planning to avoid any unpleasant surprises.

Since this ambitious project aims to make some 50 businesses

work together as if they were a single organization, a project

management structure was implemented during the past year

with numerous general managers of the cooperative network

reviewing each of the project parameters in detail.

This expertise and project management approach acquired

by La Coop’s network is a significant side-benefit of the

Chrysalide project. Overall, our management capacity was

strengthened and this should benefit the development of the

agricultural cooperative movement in the coming years.

While focusing mainly on the rollout of the Chrysalide

project during the past year, we also undertook several steps

to implement this broad-ranging project.

Almost half of feedmills existing at the start of the project

planning stage have been closed. A high percentage of

monogastric feeds and feeds for ruminants are now located

in the right facilities, creating significant synergy.

Many regional sales teams were formed with numerous network

cooperatives pooling their management and control resources.

La Coop’s network has also adopted a common strategy to

upgrade its IT systems. The ramping up of our management and

communication tools, named the SSI Project, is a powerful tool

for harmonizing our business practices, and is also integral to

the Chrysalide Project approach.

Heightened inter-cooperation has undoubtedly helped

cooperatives of La Coop’s network to generate sound financial

results and increase their contributions more than twofold

since 2007.

During the past fiscal year, we also started planning on how

to apply Chrysalide principles in the petroleum products

distribution sector.

A consensus has already emerged on the guiding principles

for the planning process. As numerous projects are currently

underway, we deliberately slowed down the planning process

for the sector but I hope a network consensus on the Chrysalide

Petroleum Products Project will emerge in 2009-2010.

We must keep in mind that the coming year will be a defining

one for the Chrysalide Project in the Animal Production

sector as the total expected savings will be generated once

the final project components such as plant and input pooling

and concentrating processing volumes in selected plants are

implemented.

Needless to say, this stage requires heightened solidarity

across La Coop’s network as any pullback by a participating

cooperative will be detrimental to the interests of all.

The challengesHaving looked back at the past year, let us now look to the future

and the challenges facing us in the coming year.

The various attempts to restart World Trade Organization

(WTO) negotiations, despite clear commitments made by the

G20, did not garner a consensus strong enough to make us

overly concerned about an agreement on agriculture.

That does not mean that the issue has been settled

definitively. Additional tariff reductions are still a real threat

and, coupled with the current rise of the Canadian dollar, could

seriously disrupt our supply management systems.

The relative stability resulting from supply management is

essential for maintaining a dynamic agriculture sector, which

has been hurt in recent years by highly volatile input and

commodity prices.

That is why we support the G5 coalition. Discussions are still

underway with momagri, an organization set up by a few French

cooperatives to ensure recognition for the specific and strategic

nature of agriculture.

The momagri model essentially consists of replacing the

current liberalization approach with a global market regulation

system that promotes trade, provided such trade optimizes

security of food supplies for all countries.

Agriculture will be a major challenge in the 21st century.

Currently, almost a billion people around the world are going

hungry and most of them are peasants.

Malnutrition is driven by several causes but the growing

financiarization of agriculture for nearly 30 years and lower

agricultural subsidies resulting from trade liberalization are

certainly contributory factors.

World population is expected to grow from 6.8 billion to

9.3 billion over the coming 40 years, thereby increasing the

number of hungry people on the planet together with political

ramifications on every continent.

The challenge of feeding this growing population must be

met under conditions of global warming, which is marked by

increasingly wide swings in weather patterns.

Potentially fertile land is reduced as a result, with access to

water becoming more of a strategic issue for agriculture.

But all is not gloom and doom, as effective demand for food

is also growing and as most experts believe that Canadian agri-

culture will benefit from global warming in the medium term.

To successfully meet the challenge, all agricultural sectors

in the world must make contributions with agricultural market

regulation systems implemented at the global level to ensure

economic, social and environmental balance.

La Coop fédérée and La Coop’s network have already

made a commitment to sustainable development under


Presi

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Messa

gethe consultation process of the Commission sur l’avenir de

l’agriculture et de l’agroalimentaire québécois (Commission on

the future of the Québec agriculture and agri-food system)

Several projects are underway in La Coop’s network,

including a pilot project for a sustainable development grading

system in the Lac-Saint-Jean region.

This system, developed by Coop de France and the

Nouricia cooperative, should allow all network stakeholders

to eventually adapt our management systems and improve

performance relating to sustainable development.

La Coop fédérée will carry out an energy efficiency analysis

of its facilities this year to generate recurring savings that will

help lower production costs and reduce greenhouse gases.

La Coop fédérée and several network cooperatives are also

collaborating on various research projects for making use of

agriculture biomass and developing different agro-energy

systems.

La Coop fédérée is also collaborating with Groupe Terrena,

France’s largest cooperative, to develop a range of products and

services for ecologically intensive agriculture.

This challenge has to be met under trying economic condi-

tions. The economic crisis has thrown public finances into

disorder with most governments experiencing escalating debt.

Reform of the Farm Income Stabilization Insurance (FISI)

program is one of the consequences – the nearly $120 million

cutback in potential annual support will definitely have

an impact on Québec agriculture and regional economic

development.

Québec’s new agricultural policy is still unknown but we

hope the government will give itself the means to match its

ambitions and will set up a regulatory framework allowing

cooperatives to fully accomplish their roles.

La Coop’s network We must keep in mind our common assessment of the economic

situation of cooperatives and member producers that led to the

Chrysalide Project.

We knew that the process would be difficult but that change

was inevitable. Our assessment is still relevant and the pressure

on farm income is a growing hot topic.

I can hardly imagine what the future of the agricultural

cooperative movement would look like had we not undertaken

this analysis and this reorganization project spanning several

years.

With the Chrysalide project, we can learn how to better share

a common structure. With the Chrysalide project, we can learn

how to work together and, in this respect, we are only at the

beginning of what will become a new way to realize our

collective potential in the future.

The Chrysalide project gave us the means to stop talking

about inter-cooperation… and to start doing it.

Although the Chrysalide Project aims to provide the smallest

cooperatives with development tools, a few cooperatives have

opted to merge with neighbouring cooperatives.

This is the outcome of better communication between

cooperatives. By talking to each other more and having collabo-

rated on developing the Chrysalide Project, some cooperatives

chose to merge.

The majority of cooperatives are now able to offer new

products and services to their members and develop new

business lines.

Developing a more sustained network approach also requires

La Coop’s network to strengthen its governance practices.

In recent years, La Coop fédérée has organized several events

involving key leaders of our cooperatives.

The President’s Tour, the Presidents’ Forum and the semi-

annual meeting are all events that allow the Board of Directors

of La Coop fédérée to hear the opinions of member cooperatives

on different issues and better fulfill its driving role in federation

governance and ensure cohesion across La Coop’s network.

With this in mind, we organized specific activities in the past

year for those primarily responsible for developing La Coop’s

network, namely the presidents of affiliated cooperatives of

La Coop fédérée.

For instance, presidents of cooperatives with hardware

businesses were invited for the first time to attend the Unimat

show and benefit from the expertise of our leading managers in

this important network sector.


President's M

essageWe also organized an official delegation of presidents to visit

different cooperatives in France to study their approach and

their tools for developing new business lines.

Such initiatives will be repeated as necessary to ensure

sound communication and a cohesive vision for network

development among the leaders of the agricultural cooperative

movement.

Successfully completing an undertaking as daunting as

the Chrysalide Project with the involvement of scores of busi-

nesses and hundreds of people is an ambitious but motivating

task. Such a transformation is no simple process and cannot be

undone once underway.

We know that pressures on the agriculture sector can only

intensify. It is up to us to give ourselves the tools we need to

meet the challenges of the future.

To do so, we must draw inspiration from the factors underly-

ing the agricultural cooperative movement’s successes in recent

years. Your solidarity and desire to work together with your

neighbours are key to the success of the Chrysalide Project and

key to your own success as producers.

To conclude, I would like to thank my colleagues on the

Board of Directors for their steadfast support, drive and skills

in guiding the reorganization underway at La Coop fédérée and

the network of agricultural cooperatives.

I would also like to thank Réjean Nadeau and his team

for producing gratifying results under difficult economic

conditions.

I also extend warm thanks on my behalf and on behalf of all

members of the network to our Chief Executive Officer Claude

Lafleur and his team and to all managers of La Coop’s network

who helped in small or large ways to develop the Chrysalide

Project rollout plan.

Your skills and your commitment to the longevity of network

cooperatives and the economic successes of their members have

already started to reap dividends. We know we can count on

your professionalism to ensure that the Chrysalide Project

rollout plan is successfully implemented over the coming years.

Finally, I would like to thank you, the leaders of La Coop’s

network. With your open-mindedness and commitment to work

in the best interests of your members, you are helping to ensure

the future of agricultural production in Québec.

Denis RICHARDPresident of La Coop fédérée

The Chrysalide project gave us

the means to stop talking about

inter-cooperation and to start

doing it.


Cooperative Overview


Cooperative OverviewDancing to the rhythm of your dreams! The ideal partner to take up the

dance and weave great ideas,

big or small, revolutionary or

traditional, La Coop’s network is

always there with customized

service to meet evolving

client needs.


Coope

rative

Over

view

1st movementFree and open membershipDuring the year, La Coop fédérée recorded four new members

and two withdrawals. Nine cooperatives were involved in

four mergers, creating four new cooperatives. At year-end,

La Coop comprised 106 cooperatives, bringing together some

60,000 regular members and more than 30,000 auxiliary or

associate members, for a total of more than 90,000 members.

Steps may vary, but a dance remains a dance. Down through time, dancing has been a popular expres-

sion in all cultures, linking worlds and bonding individuals within communities. Every dance has its own

beat and movements that identify it and make it unique. The same is true of cooperation.

Cooperation has been enriching the theme of market economy since 1844. Originating under the

Rochdale Equitable Pioneers Society, which set down the basic ideas and practices, the cooperative

business model has continued to flourish, offering consumers throughout the world a solution to the

excesses of capitalism.

Cooperatives are not all identical – but they do all share a theme. The cooperative experience has been

renewed and enriched by every culture and each generation. We are proud to share with you the steps to our

dance for the 2008-2009 fiscal year as we extend a hand to the young people who will follow us and take up

their position on the floor.

Cooperation – variations on a theme

2nd movementDemocratic member controlAs at October 31, 2009, 606 members elected by their peers

managed 106 cooperatives affiliated with La Coop fédérée

and were entitled to appoint 338 delegates to represent them

at meetings. Of this number, 264 delegates and 41 alternates

attended La Coop’s Annual General Meeting in February 2009,

bringing the participation rate to more than 90%.

Other meetings throughout the year provided cooperative

executives with opportunities to enter into open dialogue and

guide La Coop’s actions. A total of 303 presidents, vice-presidents

and general managers participated in the President’s Tour in

January 2009, while 56 cooperative presidents took part in the



Presidents’ Forum in April 2009 and 154 cooperative executives

attended the semi-annual meeting in August 2009. La Coop

also ensures close relationships with its members by setting up

various committees and inviting representatives of affiliated

cooperatives to serve on them.

The Board, which is made up of 15 elected directors from

the 15 regional and provincial areas, devoted 28 working days

to La Coop’s commercial and cooperative affairs (excluding

Olymel L.P.’s operations). Furthermore, the directors participated

in two shorter conference calls. Last, the Executive Committee

spent an additional 10 days and participated in a conference call

reviewing various matters.

3rd movementMember economic participation The affiliated cooperatives hold $94,9 million worth of

La Coop common shares and $301,8 million as a collective reserve.

This reserve is used to ensure La Coop’s future development and

to support various undertakings related to the needs of affiliated

cooperatives.

In 2009, La Coop also declared patronage refunds to its members

for a total amount of $15 million, bringing total patronage refunds

to cooperatives to $63,5 million for the past five years.

The movements

Dancing to the rhythm of your dreams!

4th movement Autonomy and independenceLa Coop ensures its independence from lenders by

maintaining conservative financial ratios. It also strives to

retain a majority interest when entering into alliances with

other enterprises.

La Coop promotes sound governance practices, most notably

by separating the positions of president and general manager,

by fostering directors’ independence from management and by

pursuing sustainable results.


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In addition, La Coop recognizes the autonomy and indepen-

dence of its member cooperatives. La Coop has implemented

various initiatives to meet the needs of a minimum number of

its affiliated cooperatives, while making program participation

optional for each cooperative.

5th movementEducation, training and informationLa Coop communicates with all members of affiliated agricul-

tural cooperatives via its magazine, Le Coopérateur agricole, its

main informational tool, which is published ten times a year.

Moreover, with its online news brief, La Coop en ligne, La Coop

can communicate rapidly and frequently with all its employees

and network leaders; 44 issues were sent out last year.

La Coop provides training for all elected representatives to

support their role within the agricultural cooperative network.

Currently, 395 elected representatives are taking part in this

program. Of that number, 75 have earned formal designations

as members after accumulating 15 training credits; 66 are

companions (30 credits) and 86 are commanders (45 credits or

more). Employees have access to 75 training courses tailored

to their needs offered by Académie La Coop, representing an

investment for the year of $6.3 million or more than 2% of the

payroll.

Dancing to the rhythm of your dreams!

Moreover, La Coop pursues its education and training

objectives among a number of target groups, including young

and/or female agricultural producers, by organizing annual

seminars and forums. It offers scholarships to students and

provides financial support to various educational institutions.

Efforts are also made to educate opinion leaders and the general

public on the relevance of the cooperative agricultural model.

6th movementCooperation among cooperativesLa Coop’s involvement in a variety of organizations and

associations enhances its member services and strengthens

the cooperative movement. These groups include the Conseil

québécois de la coopération et de la mutualité, the Conseil

Canadien de la coopération et de la mutualité, the Fondation

québécoise pour l’éducation à la coopération et à la mutualité,

la Société de coopération pour le développement international

(SOCODEVI) as well as Co-operators Life Insurance Company,

Cooperative Research Farms, Gene +, Interprovincial Co-operative

and Independent Lumber Dealers Co-operative.

Through personnel secondments, La Coop also participated

in several missions to help overseas cooperatives supported

by SOCODEVI and promoted the use of the French language


in the Association des éducateurs coopératifs by bearing the

translation costs of its newsletter.

Within its own network, La Coop strives to foster

collaborative efforts between cooperatives to maximize

the benefits of intercooperation. During the year, La Coop

continued its support role in numerous optimization and

resource pooling projects under the Chrysalide umbrella.

La Coop advocates a global vision of the network that promotes

maintaining the largest number possible of cooperatives with

a front office while operating as an organization with a highly

integrated back office.


7th movementConcern for the communityOver the year, La Coop (including Olymel) spent an amount

of $662,000 on donations and sponsorships to assist worthy

organizations and events. More than a third of this amount was

allocated to health promotion and poverty relief.

The 2008-2009 fiscal year was above all highlighted by

the launch of the Fonds coopératif d’aide à la relève agricole,

initiated by La Coop together with the Fédération de la relève

agricole du Québec, and supported by Desjardins Group. A total

of 123 young agricultural producers qualified during the year

for an amount of up to $5,000 per year for a period of three years.

La Coop fédérée has committed $900,000 to this Fund with

affiliated cooperatives undertaking to double this amount.

La Coop also supports various contests to promote farm life,

Centraide, the Conseil de développement du loisir scientifique,

Centres régionaux d’établissement en agriculture (CREA) and

the Québec Midget AAA Development Hockey League.


Management Discussion and Analysis [in thousands of dollars] 2009 2008

Revenues $ 3,919,963 $ 3,606,101

Operatingearnings 64,967 95,986

Earningbeforepatronagerefundsandincometaxes 53,346 70,992

Patronagerefunds 15,000 30,000

Netearnings 27,600 30,390

Accountsreceivableandinventories 613,679 580,281

Currentassets 627,592 591,152

Workingcapital 191,178 181,421

Fixedassets,atcost 1,061,485 973,462

Fixedassets,bookvalue 459,860 445,157

Totalassets 1,221,516 1,143,503

Long-termdebt,includingcurrentportion 191,792 182,194

Preferredsharesandequity 412,482 383,528

Numberofemployees 11,336 11,175


Management D

iscussion and Analysis

Dancing to a world beat!La Coop’s network moves to the rhythms

of the world, a cultural diversity

that enriches our agricultural heritage.


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Gaétan DesrochesChief Operating Officer

Paul NoiseuxChief Financial Officer

Claude LafleurChief Executive Officer


Management D


Despite challenging economic conditions, arising mainly

from the financial and stock market meltdown in early

summer 2008, La Coop fédérée posted earnings of

$53.3 million for the fiscal year ended October 31, 2009

compared with $71 million for the previous year.

This decline in earnings before patronage refunds and

income taxes resulted primarily from a sharp fall in earnings at

Olymel L.P., mainly in the hog sector, where highly favourable

global market conditions pushed the meat margin to a historic

high in early 2008.

The Supply Operations sectors, namely Animal Production,

Crop Production, Grain and Feedmill Supply, Hardware and

Farm Machinery, and Petroleum made strong contributions to

La Coop’s performance. Their net contributions are higher than

for the past fiscal year, due principally to the inclusion of the

results of Agronomy Company of Canada Ltd. (“Agronomy”).

This subsidiary, acquired on December 31, 2008, operates in

the crop production sector and is mainly based in Ontario and

the Maritimes.

Consolidated revenues totalled $3.920 billion for the year

ended October 31, 2009, up from $3.606 billion for the

year ended October 25, 2008.

The increase is attributable partly to the $254 million

growth in Supply Operations sales and partly to the first-time

inclusion of 2009 sales of Agronomy and its joint ventures.

However, Petroleum Sector sales are due, in part, to generally

lower input prices, but not to lower sales volume. Other sectors

reported higher sales. For instance, sales at our subsidiary

Olymel L.P. rose $60 million over the previous fiscal year.

The impact of a 53rd week coupled with higher sales volumes

explains this increase.

Cost of sales and selling and administrative expenses rose

to $3.480 billion from $3.495 billion for the previous year. This

increase is mainly related to the acquisition of Agronomy and

a 53rd week of operations in 2009.

Financial expenses totalled $14.7 million for fiscal 2009

compared with $14.9 million for the previous fiscal year. This

year’s financial expenses include $1.9 million for interest paid on

the payment for the acquisition of an agrocentre and $1.6 million

in interest expense for the debts of Agronomy. If not for these

amounts, financial expenses would have decreased, due mainly

to lower interest rates and despite higher bank borrowings,

resulting primarily from the acquisition of Agronomy.


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Operating income totalled $65 million compared with

$96 million in 2008. Once again, we need to remember that the

hog sector enjoyed highly favourable market conditions in 2008.

The share of results of entities subject to significant influence

in which we are partners totalled $5.3 million compared with

$4.7 million for the previous year.

Gains (losses) on disposal of assets amounted to a loss of

$2.3 million compared with a gain of $475 thousand in 2008.

The 2009 loss results primarily from the settlement of the acqui-

sition of shares of an agrocentre.

In 2008, the gain on available-for-sale assets reflected the

gain from the acquisition of the additional 50% interest in

Société immobilière Immeuble 9001 l’Acadie s.e.c.

Earnings before patronage refunds and income taxes, net of

the non-controlling interest, totalled $53.3 million compared

with $71 million in 2008.

For the year ended October 31, 2009, factoring in $15 million

in declared patronage refunds and $10.8 million in income

taxes, La Coop posted $27.6 million in net earnings compared

with $30.4 million for 2008.

Segmented information(Segmented revenues include amounts related to intersegment

transactions.)

Supply OperationsConsolidated revenues from Supply Operations totalled

$1.845 billion, up $254 million from $1.591 billion for the

previous year. The increase is explained primarily by sales of

$304.1 million generated by Agronomy. Despite higher volumes,

Petroleum Sector sales decreased by $163.9 million on a sharp

drop in input prices. The Grain and Feedmill Supply and the

Hardware and Farm Machinery sectors also increased their

sales volumes.

Earnings before taxes at Supply Operations rose over the

previous year, due principally to the inclusion of the results of

Agronomy in 2009.

The Animal Production Sector reported sales of $240.5 million

for the year, up from $222.4 million for the previous year. This

amount includes animal feed sales of $189.5 million

compared with $172.6 million for the previous year. The increase

is attributable to a sharp rise in ingredient prices. The net

Revenues[in thousands of dollars]

2009 $3,919,963

2008 $3,606,101

2007 $3,286,795

2006 $3,175,705

2005 $3,141,860

Preferred shares and equity[in thousands of dollars]

2009 $412,482

2008 $383,528

2007 $338,754

2006 $305,890

2005 $321,928

Earnings (losses) before patronage refunds and income taxes[in thousands of dollars]

2009 $53,346

2008 $70,992

2007 $40,587

2006 $(21,599)

2005 $42,463

Patronage refunds[in thousands of dollars]

2009 $15,000

2008 $30,000

2007 $10,000

2006 $—

2005 $8,500

Working capital[in thousands of dollars]

2009 $191,178

2008 $181,421

2007 $43,846

2006 $164,721

2005 $197,750


Management D


Gilles DenetteChief Member Services

Alain GarneauLegal Counsel and Chief, Legal Affairs

Sophie RobillardChief, Corporate Strategies and Offer Management

Mario LeclercChief Human Resources


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contribution of animal feed climbed 10.7% over 2008. Both dairy

animal and poultry feed volumes rose 3.6%, while hog feed

sales volumes ended the year on a positive note with an increase

of 1.6%. Work on implementing the Chrysalide Project is well

underway. Significant improvements have already been achieved,

particularly in hog production with the implementation of

direct delivery from the Saint-Romuald micro pre-mix plant to

end-users of inputs for farm production. Moreover, three of the

five regional teams initially identified by the Chrysalide Project

have now been trained. Feed production is being gradually

shifted to the selected plants. Product ranges have been

streamlined and feed programs harmonized.

Crop Production Sector sales surged to $539.2 million

in 2009 from $215.7 million in 2008 thanks to net revenues

of $304.1 million generated by Agronomy. Fertilizer sales

amounted to $136.2 million, largely comparable to last year’s

total of $131.2 million. However, the increase does not reflect the

actual situation on the ground as we suffered a market reversal

starting in fall 2008, with a loss of market share and sales to

the volumes sold by new competitors. However, sharply higher

prices offset lower sales volume. Seed sales rose to $40.1 million

from $35.7 million for the previous year. Crop protection sales

totalled $55.5 million compared with $48.8 million for the

previous year.

Net sales in the Grain and Feedmill Supply Sector grew 16.5%

to $324 million from $278 million in 2008. Sector sales rose for

the third straight year. The increase is essentially explained by

higher volumes, as the average price remained relatively steady.

With more than a million tons sold, sales volumes in the sector

shattered the record set the previous year. Market conditions

and network strength had a particulary favourable impact on

corn, despite a lower-than-expected harvest. Driven by both

exports and imports, the Grain and Feedmill Supply Sector

remained very active throughout the year and generated solid

results, thereby improving its contribution.

The Hardware and Farm Machinery Sector reported net sales

of $240 million, outstripping 2008 sales by $25.4 million. This

increase is attributable equally to construction material and

hardware sales as well as to acquisitions of stores and additions

of independent stores to the Unimat banner. Net contribution

rose 70.9% compared with the previous year. Work on consoli-

dating purchases continued with membership in the Independent

Lumber Dealers Co-operative (ILDC), a new Canadian buying

cooperative. The purchasing power resulting from this cooperative

gives La Coop’s network a strong competitive edge.

The Petroleum Sector reported net sales of $500.4 million,

down from $664.3 for the previous year. Net sales in the residential

and commercial market amounted to $291 million, down 25.2%

from $389 million for the past year. This decrease followed

mainly on a 33% fall in input costs. Sales volumes rose 11.7%

mostly due to new clients and the acquisition of stores as well

as a 53rd week in fiscal 2009. For the same reason, sales at

the Motorists Department fell 25.8% to $172.5 million from

$232.5 million in 2008. The Residential and Commercial

Department increased its contribution by 117% while the

Motorists Department contribution declined 54.9%.

Net propane sales dropped 14.2% to $36.7 million from

$42.8 million last year.

Consolidated revenues from Supply

Operations totalled $1.845 billion,

up $254 million from $1.591 billion

for the previous year.


Management D


Sales at AgriEst, Coop Agricultural Centre, rose $5.7 million

to $24.5 million, driven by higher grain volumes and a strong

performance in the dairy sector while fertilizer volume dropped

sharply. AgriEst’s net contribution grew 100% in 2009.

MarketingThe review of our subsidiary Olymel L.P.’s operations for

the year ended October 31, 2009 prepared by Olymel’s Chief

Executive Officer, Réjean Nadeau, is presented on page 30

of this annual report.

Cooperative Member ServicesOver the past year, the management advisors supported

15 cooperatives in preparing their strategic plan. The

Cooperative Member Services team helped four cooperatives

in their merger process and six others in their efforts to move

towards co-management with or without administrative

outsourcing.

The team carried out 42 financial analyses and made

20 financial presentations to boards of directors of cooperatives

using a database representing 66% of the network’s total sales.

Furthermore, to ensure continuity of financial comparatives

in coming years, the team reviewed its annual report as well

as all financial analysis tools to factor in the major changes in

the network including Fidelio, Chrysalide and the new chart of

accounts.

Three management interns completed one of their internship

requirements in cooperative schools under the supervision of

Cooperative Member Services. Ten general management positions

fell vacant during the 2008-2009 year. The team supported several

general managers in the integration of their new functions and also

coordinated interim management for one of their cooperatives.

The operational efficiency team helps managers at La Coop

fédérée and cooperatives implement and ensure buy-in of a

management philosophy based on continuous improvement

and business process mapping. To better meet the needs of

managers, the team reviewed its intervention strategy in 2009,

clarifying the roles of advisors and improvement agents. This

new organizational structure was necessary to enable La Coop

to move to the next stage of continuous improvement, namely

problem resolution.

Employees submitted 2,385 new ideas during the past fiscal

year via the improvement register – twice as many as two years

ago. Forty improvement agents supported managers in managing

and implementing employee ideas. Backed by the IT team,

the department worked on designing a register accesible via

Internet. This tool will be implemented starting in January 2010

and will also allow sharing, research and a better follow-up of

submitted ideas while eliminating duplicate entries.

Some 40 kaizen activities were carried out across the

network during the year to identify and eliminate non-value

added processes. Moreover, 243 people were trained this year to

use continuous improvement tools aimed at enhancing their

problem solving skills in a team setting.

The Cooperative Member Services team continued its

involvement in the Chrysalide Project. The team was particularly

active in supporting managers of cooperatives to set up regional

advisor teams, supervise dismantling and compensation

projects and to proceed with pilot and transition projects.

Meetings were also scheduled with general managers, boards

of directors and members of some cooperatives to review

Chrysalide Project status. The team also helped network

managers identify and question current processes, establish


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active directors, 75 are designated members, 66 are companions

and 86 are commanders, all levels combined. Sixteen different

courses were provided to directors under this program.

By consolidating employee benefits across La Coop’s

network, we are able to offer various programs to help attract

and retain talent. For example, the various pension plans for

the agricultural cooperative network were combined into a

single trust fund with nearly $263 million in assets at year-end.

The fund benefited from the market upturn in 2009 and posted

12.4% growth over the same period last year. This large-scale

fund, which aims to maximize retirement income, gives

employees several investment strategy options based on six

mutual funds and two term deposit certificates.

Consolidation also benefited our group insurance program

by providing for more effective insurance policy management

in partnership with employees. This strategy coupled with the

group’s experience held premium increases to a minimum in

relation to the market.

As regards labour relations, a total of 14 collective bargaining

agreements were negotiated during the year. A work dispute

disrupted operations at a network hardware store for several

weeks, while another dispute at an Olymel plant remains

unresolved at year-end. Each negotiating table is an opportu-

nity to make employees and unions aware of the importance

of maintaining working conditions at competitive levels in a

constantly changing market. Operational effectiveness and

customer service were also reviewed during the drafting of

labour contracts.

The participation of 83 cooperatives in the health and safety

prevention mutual group, Mutuelle de prevention en santé-

sécurité, translated into network-wide savings of approximately

$1.3 million in 2009, or 37% of the contributions that would have

been required without this combined participation. Group

contributions and prevention initiatives have led to a

custom ized contribution rate tied directly to the frequency

and seriousness of accidents, generating over $13 million in

savings for cooperatives since the group’s inception.

sound business practices and document future business models

and processes.

Administrative DepartmentsOur Administrative Departments posted net expenses,

including the results of the real estate subsidiary, totalling

$18.3 million compared with $13.6 million for the previous year.

The increase in net expenses resulted from higher costs related

to Chrysalide Project administration, system and technology

upgrades and a contribution to an agricultural succession fund.

Human ResourcesAt the end of fiscal 2009, La Coop fédérée and its subsidiaries

had a roster of 11,336 employees, up from 11,175 in 2008. The

change stemmed from various transfers across our operations.

The Recruiting Department has developed various strategies

to attract quality candidates for positions within the network

and retain highly qualified employees despite the shortage of

human resources in certain employment categories, particu-

larly in information technology. We received a significantly

higher number of resumés this year following the worst of the

recession and the implementation of a strategy to better target

our recruitment sources.

Special efforts were made with respect to change manage-

ment by implementing all communication, motivational,

training and coaching activities necessary to ensure the buy-in

and commitment of individuals impacted by change, with a

view to facilitating the transition and reaching optimal

productivity as quickly as possible

Académie La Coop provided over 75 courses to nearly

2,500 participants. La Coop fédérée invested 2.02% of its

total payroll in training, representing more than $6.3 million

for 2009.

Fully aware of the need to train employees to deal with new

challenges, La Coop fédérée intends to continue providing more

training courses over the coming years.

The development program for elected members continues

to be offered to directors across La Coop’s network. Among


Management D


Financial positionAs at October 31, 2009, La Coop fédérée reported $1.221 billion

in consolidated balance sheet assets, up from $1.143 billion at

the previous year-end. The growth in total assets results mainly

from a business acquisition as described in note 2 to

the Consolidated Financial Statements.

Current liabilities increased to $436 million from $410 million

at the end of last year, primarily due to the short-term

borrowings of the acquired business. However, the increase was

partly offset by the decrease in derivative financial instruments

caused by exchange rate fluctuations at fiscal 2009 year-end.

Working capital amounted to $191 million, up from

$181.4 million for the previous year. The working capital ratio

remained steady at 1.4. La Coop fédérée reported a consolidated

debt ratio of 36:64 at year-end, compared with 33:67 for the

previous year.

Preferred shares, share capital and reserve totalled

$412.5 million as at year-end, compared with $383.5 million as at

the end of 2008. These items accounted for 33.8% of total assets

compared with 33.5% as at the previous year-end. La Coop fédérée

reported a reserve of $301.8 million as at October 31, 2009,

representing 73.2% of preferred shares and equity.

Liquidity and capital resourcesLa Coop fédérée has access to the capital resources it needs

through agreements with Canadian financial institutions.

The agreements with a syndicated group of financial insti-

tutions provide an overall credit facility of $300 million.

Drawdowns under the credit facility as at October 31, 2009

totalled $87.9 million compared with $77.5 million as at

the end of 2008.

La Coop has other borrowing arrangements, such as a

$30 million fixed-rate term credit facility, repayable in four

annual instalments beginning in August 2011. In addition,

La Coop has an unsecured fixed-rate debenture with a balance

of $25 million, repayable in three annual instalments beginning

in August 2012. La Coop also has a fixed-rate term note with a

balance of $19.2 million as at October 31, 2009 compared with

$20.8 million in 2008.

The credit facility, term credit facility and term note are

collateralized by first hypothecs on a majority of the current

and future tangible and intangible assets of Olymel L.P.

and its subsidiaries.

La Coop fédérée determines its capacity to invest in

current property, plant and equipment based on cash flows

from each of its operating sectors. For fiscal 2009, investments in

property, plant and equipment totalled $46.4 million. A cautious

approach to managing working capital items combined with

stringent controls over capital expenditures have helped

minimize financing costs. La Coop fédérée met its financial

obligations for each quarter of fiscal 2009 and complied with

financial covenants under its financing agreements.

Derivative financial instrumentsin accordance with its risk management strategy, La Coop uses

derivative financial instruments to manage foreign exchange

risk, risk related to certain commodity prices and interest rate

risk. The derivative financial instruments consist of foreign

exchange contracts, currency swaps, commodity forward

contracts and interest rate swaps. La Coop does not use

derivative financial instruments for speculative purposes.

Hedge accounting is used where La Coop documents its cash

flow hedging relationships and risk management objectives and

strategy, and demonstrates that they are sufficiently effective

at the hedge’s inception and throughout the hedge period.

La Coop often sells and buys outside Canada, mainly in

US dollars, yen and Australian dollars. To manage foreign

exchange risk, La Coop uses foreign exchange contracts and

currency swaps.

Foreign exchange contracts and currency swaps used by

La Coop to hedge against foreign exchange risk, mainly in respect

of foreign currency transactions, exceeded C$1.1 billion in 2009.

La Coop also uses an interest rate swap to manage interest

rate risk. Gains and losses on the interest rate swap entered


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into to hedge future cash flow transactions are accounted for in

other comprehensive income and reclassified to earnings when

the hedged item affects earnings.

Risks and uncertaintiesLa Coop is exposed to various risk factors that may influence the

profitability of its Marketing Operations and Supply Operations

in the normal course of business.

Input price fluctuation risksInput prices vary depending on several external factors while

extreme price volatility stems from continually changing

supply markets. La Coop’s economic environment is regulated

by national and provincial policies affecting slaughterhouse

supply. As a result, changes in market policy influence livestock

availability and prices. La Coop strives to maintain stringent

controls over production costs to offset exposure to supply

prices and costs, which are beyond its control. La Coop miti-

gates this risk factor by operating in a variety of sectors.

Food safety risksLa Coop is exposed to a number of industry-related risks,

primarily in its food processing and marketing operations.

La Coop must manage exposure to consumer product spoilage

and contamination, and related liability risks. La Coop ensures

compliance with government requirements through stringent

food safety controls at all its plants.

Livestock health risksThe prospect of livestock contamination and epidemics is a

crucial risk factor for La Coop. Epidemics can have a major

impact on production and access to raw material supply at its

processing plants. Quality management is of utmost impor-

tance to La Coop. Accordingly, improving internal traceability

procedures and supporting the development of a national

strategy with government bodies are key to sound livestock

management.

Environmental risksIn keeping with its commitment to the principle of social

responsibility, La Coop fédérée ensures that its business

practices comply with diligent environmental management

principles.

With its environmental policy, La Coop aims in particular

to comply with laws and regulations, implement environmental

emergency plans, perform environmental assessments of

businesses, operations or property it intends to acquire or start

up, communicate its environmental goals and projects

to employees and managers, and report on environmental

management activities to the Board of Directors as often

as necessary and at least once a year.

The Environment Department provided ongoing technical

support to La Coop’s various sectors and those of its partners,

resolving specific environmental issues and providing updates

on environmental regulatory changes.

In accordance with its environmental policy, La Coop

fédérée also performed an environmental compliance audit

of existing facilities as well as environmental assessments of

acquisitions, particularly 38 facilities of the newly acquired

Agronomy.

With the Chrysalide Project, La Coop fédérée promotes the

systematic integration of environmental management in its

practices and its new operational structures, which will make

its plants the backbone of La Coop’s network. Accordingly, all

the feedmils in the animal feed production network are upgrad-

ing their facilities to ensure compliance with standards, sound

practices and current environmental regulations in order to:

– Integrate environmental management in their operations.

– Promote healthy relationships with their surroundings.

Last, to raise awareness and participate in the collective

efforts of employees to reduce their environmental footprint,

La Coop fédérée is committed to obtaining the third level of

RECYC-QUÉBEC’s Ici on recycle! certification (performance)

in the coming year by supporting efforts to recycle, reduce

and reuse (the 3Rs).

Global market risksLa Coop’s exports are affected by a number of economic

variables that influence global markets. Export volumes are

dependent on economic conditions and, in some cases, on trade

barriers in importing countries. Export growth and profitability

are closely linked to the strength of these markets and their

compliance with international trade treaties and rules.

Financial instrument risksLa Coop provided qualitative and quantitative information

regarding its exposure to financial instrument risks, including

credit risk, interest rate risk, liquidity risk, foreign exchange risk

and the other price risks. Note 19 to the Consolidated Financial

Statements discloses the nature and extent of risks arising from

financial instruments and related risk management.

ConclusionLa Coop fédérée ended its fiscal year with satisfactory results

given the recession that rocked the North American economy.

Olymel’s relatively modest results coupled with those of our

Agronomy subsidiary and the very considerable contributions

of our hardware and grain marketing operations enable La Coop

to proceed with the Chrysalide Project, continue improving

services to members, meet financial objectives set by the Board

of Directors and comply with the ratios required by our banking

institutions.

With continued gradual implementation of the Chrysalide

Project in the Animal Production, Petroleum and Hardware

Sectors, the agricultural cooperative network will be even better

placed to face the competition and fulfill its mission among its

members.

While La Coop’s results will positively impact those of our

affiliated cooperatives and ultimately benefit our members,

we should not forget that the agricultural sector is currently

undergoing one of the most extensive restructuring processes in

its history. The farm income crisis combined with the changes

to income support programs proposed by the provincial govern-

ments will prompt many producers to substantially review their


Management D


business models and to change and very likely strengthen their

relationships with La Coop’s network. Some may well question

their roles as producers.

The challenges facing us are clearly many. La Coop fédérée

must keep a close eye on current realities and ensure that

actions taken give priority to the members and their coopera-

tives. The Québec agriculture sector is undergoing profound

changes. Against this backdrop, if we want to help member

producers and their cooperatives generate higher profits, if we

want to protect and even create jobs, we must innovate and

constantly review our ways of doing things and develop genuine

coordination of La Coop’s network. This is the essence of our

mission and our Chrysalide Project.

Leveraging our cooperative advantage and the expertise

of our people, the agricultural cooperative network is firmly

committed to strengthening our leadership position and

becoming the partner of choice in the successes of our

members. Our solidarity and commitment to forging a stronger,

more cohesive cooperative network will be our legacy to the

agricultural cooperative movement.

I would like to take this opportunity to offer warm thanks

to my colleagues on the Extended Corporate Governance

Committee and the leaders across our network of affiliated

cooperatives and at our Olymel subsidiary for their loyalty, their

commitment and their support in achieving these results.

And I would be remiss in concluding this report without

extending my heartfelt thanks to our president, Denis Richard,

and to all our Board members, for their exceptional support and

trust throughout the year.

Claude LAFLEURChief Executive Officer


Olymel Overview

La Coop’s network, in tune

with today’s consumer.


Olymel Overview

Dancing in harmony!


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Claude LafleurChief Executive Officer,La Coop fédérée

Paul NoiseuxChief Financial Officer, La Coop fédérée/Olymel

Maintaining competitiveness is key

F iscal 2009 results were relatively satisfactory, although

falling short of last year’s performance. During the past

fiscal year, many businesses around the world went on the

defensive as the global economic and financial crisis triggered

a pullback, particularly in foreign markets such as China,

Russia and Korea. The H1N1 flu virus, which has been linked to

various swine herds since its outbreak, was also a concern in the

markets. Amidst these trying and uncertain conditions, Olymel

held its own, strengthened by restructuring initiatives taken in

recent years.

During most of fiscal 2009, the Canadian dollar weakened

against the US dollar, largely offsetting lower meat margins

compared with the previous fiscal year, particularly for fresh

pork. Following the recent strengthening of the Canadian

currency, many economists expect a return to parity with

the US dollar towards mid-2010. As this could lead to greater

competition, mainly from the United States, maintaining our

competitiveness is crucial.

Sales increased slightly in fiscal 2009 to $2.091 billion, up

$60 million from fiscal 2008. An additional 53rd week in fiscal

2009 and higher volumes, primarily in the Eastern Fresh Pork,

Turkey, Processed Pork and Poultry sectors, contributed to

higher sales. A large-scale sales offensive was also launched in

markets outside Québec, particularly in Western Canada, to

bolster Olymel’s profile and product sales. A significant portion

of our national brand sales now come from markets outside

Québec.


Olymel Overview

Réjean NadeauPresident and Chief Executive Officer, Olymel

Denis RichardPresident, La Coop fédérée and Chairman of the Board Olymel

Fresh porkThe Eastern Fresh Pork Sector generated positive results for the

second straight year, driven mainly by a weaker Canadian dollar

and the resulting higher meat margin, the increase in volumes

and improved labour productivity. However, the meat margin

fell back to 2007 levels after increasing substantially

in 2008.

The new marketing agreement with the Fédération des

producteurs de porcs du Québec in the Eastern Fresh Pork

Sector, which came into force on February 8, 2010, should have

wide-ranging impact on the industry, notably in relationships

between producers and processors. That said, the Québec

government’s stated intention to review the hog producers’

Farm Income Stabilization Insurance (FISI) program and the

expected reduction in Québec swine production create much

uncertainty regarding stable supply – the basic principle under-

lying the new agreement – and could undermine its functioning.

This major issue will be a key concern in 2010. Steps have also

been taken in collaboration with our owners to raise producers’

farm income, and we are confident of a positive outcome in the

coming fiscal year.

The Western Fresh Pork Sector also posted positive results,

improving on previous year performance, despite marginally

lower slaughtering volumes stemming from a decrease in

deliveries. These results were fuelled by a combination of

factors, including the weaker Canadian dollar, lower operating

costs and a product and client portfolio that had a very positive

impact on the margin. Discussions to forge a partnership with

Alberta producers are still underway.


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Processed porkIn 2009, the Processed Pork Sector improved on its 2008

performance, mainly due to higher volumes and margins across

all product lines with the exception of bacon, which has faced

strong competition from the United States since the end of 2008.

Various cost reduction initiatives that were taken during the

year against this background should be carried forward into

the future.

Fresh poultryResults in the Fresh Poultry Sector were considerably lower

than for the previous fiscal year. The first half of fiscal 2009 was

marked by a sharp rise in supply costs following surging grain

prices as well as excess production leading to an imbalance in

supply and demand. The second half of the year was however

more favourable due to lower production volume and reduced

live poultry prices. Encouraging signs of a return to market

equilibrium finally emerged towards the end of fiscal 2009.

The Turkey Sector reported a loss in 2009 compared with

a profit in 2008 as it was more severely affected by the same

factors as those impacting the Fresh Poultry Sector.

Existing tensions in interprovincial trade remain a concern

for the poultry sector and the bypassing of regulations is a

serious problem. Temporary measures taken recently by the

Ontario and Québec governments to cap inter-provincial live

poultry exports should prompt the industry to seek solutions

that satisfy all stakeholders.

In New Brunswick, Olymel and Westco continue to operate

under their partnership – Sunnymel. In 2009, several legal

proceedings were ruled in favour of this partnership and other

producers, allowing Westco to have its chicken slaughtered at

Olymel in Québec since September 2009, pending construction

of a new slaughterhouse at Clair, New Brunswick to serve the

Maritimes market. However, the New Brunswick government

passed a law forcing Westco and other producers to slaughter

their chicken in the province itself. A ministerial order was

issued in January 2010 to implement this law as of January 31,

2010. At the time this report was written, the parties were

studying all available recourses.

Sales increased slightly in fiscal 2009

to $2.091 billion, up $60 million

from fiscal 2008.

Annual Report 2009 - La Coop fédérée

—35—

Olymel Overview

Processed poultryProcessed Poultry Sector results fell below 2008 performance.

Despite higher volumes, the meat margin declined,

due primarily to rising supply costs.

Developing Olymel by leveraging its strengthsWhile persisting with efforts to maintain competitiveness,

productivity and profitability, Olymel must face market and

industry-specific challenges, and ensure we remain a socially

responsible business. We must continue to meet the needs of

our clients and consumers, the expectations of our owners and

employees while adapting to the ever-changing world we

operate in. After years of restructuring, fiscal 2009 was a year

of consolidation.

As a leading agri-food processor, product safety is more than

ever of primary concern to Olymel. The listeriosis outbreaks

in 2008 and 2009 are wake-up calls to exercise unflagging

vigilance. We strengthened our operational structure in 2009

after reviewing our control processes in collaboration with the

Canadian Food Inspection Agency (CFIA).

We remain focused on reducing the environmental impact

of all Olymel operations in terms of packaging, waste treatment

and energy and water consumption.

For fiscal 2010, we will continue to prioritize human

resources and strengthen the sense of belonging among our

10,000 employees. For both executives and employees, we will

persist with the efforts already initiated over the last few years

relating to internal communication, training, personnel

retention and improving employer-employee relations. During

fiscal 2009, we renewed seven collective bargaining agreements.

Lower absenteeism and reduced workplace injury rates, more

efficient work organization and skills development are all

permanent goals, and progress made must be built upon.

In this respect, I would like to draw attention to the steadfast

commitment of our management team and the sustained

efforts of our executives and all personnel across our facilities.

Each and every one of them is making a contribution towards

improving our performance in their respective sectors.

Last, as in the past, our owners have been responsive partners.

Our success depends as much on their commitment as that of

our employees. I am grateful to all of them. I would also like

to thank all our directors and particularly the Chairman of

the Board, Denis Richard, for their understanding and

clear-sighted advice.

Réjean NADEAUPresident and Chief Executive Officer, Olymel L.P.


Years ended

October 31, 2009

and October 25, 2008

Consolidated Financial Statements


Setting the rythm

“ We do not inherit the earth

from our ancestors:

we borrow it from our children.”


Management Report


The consolidated financial statements and other financial information included in the Annual Report of La Coop fédérée (“La Coop”)

for the year ended October 31, 2009 are management’s responsibility and have been approved by the Board of Directors. This

responsibility involves the selection of appropriate accounting methods as well as the use of sound judgment in the establishment

of reasonable and fair estimates according to Canadian generally accepted accounting principles and the application of the regulations of

the Cooperatives Act. Financial information presented elsewhere in this Annual Report is consistent with that in the consolidated financial

statements.

Management maintains accounting and administrative control systems designed to provide reasonable assurance regarding the accuracy,

relevance and reliability of financial information, as well as the efficient and orderly conduct of La Coop’s affairs. The Internal Audit Department

evaluates accounting and internal control systems on an ongoing basis and regularly reports its findings and recommendations to management

and the Audit Committee.

The Board of Directors ensures that management assumes its responsibilities with respect to financial reporting and review of the consolidated

financial statements and Annual Report, mainly through its Audit Committee consisting of outside directors. The Audit Committee holds regular

meetings with the internal and external auditors and with management representatives to discuss the application of internal controls and

examines the consolidated financial statements and other matters related to financial reporting. The Audit Committee reports and submits its

recommendations to the Board of Directors.

The auditors appointed by the members, Ernst & Young LLP, Chartered Accountants, have audited the consolidated financial statements and their

report appearing hereinafter indicates the scope of their audit and their opinion thereon.

Claude LAFLEUR Paul NOISEUX, CGA

Chief Executive Officer Chief Financial Officer

Montréal, December 23, 2009

Auditors’ Report


To the members of

La Coop fédérée

We have audited the consolidated balance sheet of La Coop fédérée (“La Coop”) as at October 31, 2009 and the consolidated

statements of earnings and reserve, comprehensive income and cash flows for the year then ended. These financial

statements are the responsibility of La Coop’s management. Our responsibility is to express an opinion on these financial

statements based on our audit.

We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and

perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes

examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing

the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement

presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of La Coop as at

October 31, 2009 and the results of its operations and its cash flows for the year then ended in accordance with Canadian generally

accepted accounting principles.

Montréal, Canada

December 23, 2009

[except for notes 4, 5 and 14,

which are as of January 14, 2010]

1 CA auditor permit No. 08697

1

As at October 31, 2009


ConsolidatedBalance

Sheet


[in thousands of dollars] 2009 2008

ASSETS

Current assetsAccounts receivable $ 319,964 $ 299,137Inventories [note 6] 293,715 281,144Prepaid expenses 10,932 6,590Derivative financial instruments [note 19] 524 2,532Future income tax assets [note 5] 393 992Investments – current portion [note 7] 2,064 757

627,592 591,152Investments [note 7] 36,382 29,927Property, plant and equipment [note 8] 459,860 445,157Employee future benefit asset [note 13] 17,306 15,464Goodwill [note 9] 59,596 43,173Other assets [note 10] 20,780 18,630

$ 1,221,516 $ 1,143,503

LIABILITIES AND EQUITY

Current liabilitiesBank overdrafts $ 15,738 $ 17,238Short-term borrowings [note 11] 36,744 6,341Accounts payable and accrued liabilities 364,729 353,287Income taxes payable 1,396 6,570Derivative financial instruments [note 19] 2,963 12,445Patronage refunds payable [note 4] 3,000 6,000Redeemable preferred shares – current portion [note 14] 3,501 —Long-term debt – current portion [note 12] 8,343 7,850

436,414 409,731Long-term debt [note 12] 183,449 174,344Employee future benefit liability [note 13] 32,220 29,888Future income tax liabilities [note 5] 18,950 17,207Non-controlling interest [note 17] 141,899 132,027Preferred shares [note 14] 4,362 4,632

EquityShare capital [note 14] 102,552 104,699Reserve 301,797 274,197Accumulated other comprehensive income [note 15] ( 397 ) ( 3,222 )

$ 1,221,516 $ 1,143,503

Commitments and contingencies [note 17]

The notes are an integral part of the consolidated financial statements.

On behalf of the Board,

Denis RICHARD, Director Ghislain CLOUTIER, Director

Years ended October 31, 2009 and October 25, 2008

Consolidated Statement of Earningsand Reserve


Consolidated Statement ofComprehensive Income



Revenues $ 3,919,963 $ 3,606,101

Operating expenses [note 3]Cost of sales and selling and administrative expenses 3,840,313 3,495,139Financial expenses 14,683 14,976

3,854,996 3,510,115

Operating income 64,967 95,986

Other income and expensesShare of results of entities subject to significant influence 5,301 4,682Gains (losses) on disposal of assets ( 2,309 ) 475Gain on available-for-sale assets [note 24] — 1,835

2,992 6,992

Earnings before non-controlling interest, patronage refundsand income taxes 67,959 102,978

Non-controlling interest 14,613 31,986

Earnings before patronage refunds and income taxes 53,346 70,992

Patronage refunds [note 4] 15,000 30,000Income taxes [note 5] 10,746 10,602

Net earnings 27,600 30,390

Reserve, beginning of year 274,197 243,807

Reserve, end of year $ 301,797 $ 274,197



Net earnings $ 27,600 $ 30,390

Other comprehensive incomeChange in fair value of derivative financial instruments designated as cash flow hedges

Unrealized losses, net of taxes of $2,721 ($1,638 in 2008) ( 6,045 ) ( 3,480 )Reclassification of gains and losses to earnings, net of income taxes of $4,050 ($44 in 2008) 8,870 ( 95 )

2,825 ( 3,575 )

Comprehensive income $ 30,425 $ 26,815


Years ended October 31, 2009


Consolidated Statement of

Cash Flows



OPERATING ACTIVITIES

Net earnings $ 27,600 $ 30,390Non-cash items:

Amortization [note 3] 54,164 50,321Losses (gains) on disposal of assets 2,309 ( 475 )Gain on available-for-sale assets — ( 1,835 )Future income taxes 1,912 179Loss on derivative financial instrument 138 289Change in employee future benefits ( 205 ) ( 845 )Non-controlling interest 14,613 31,986Share of results of entities subject to significant influence ( 5,301 ) ( 4,682 )Patronage refunds paid in common shares 12,000 24,000

107,230 129,328Net change in non-cash working capital

related to operations [note 16] 43,894 ( 2,366 )

Cash flows related to operating activities 151,124 126,962

INVESTING ACTIVITIES

Business acquisition [notes 2 and 24] ( 56,202 ) ( 3,362 )Acquisitions of investments ( 9,494 ) ( 2,080 )Proceeds on disposal of investments 2,793 5,352Dividends received from entities subject to significant influence 2,047 866Additions to property, plant and equipment ( 46,380 ) ( 57,348 )Proceeds on disposal of property, plant and equipment 320 2,560Additions to other assets ( 4,997 ) ( 1,112 )Proceeds on disposal of other assets 40 —

Cash flows related to investing activities ( 111,873 ) ( 55,124 )

FINANCING ACTIVITIES

Net change in short-term borrowings ( 24,772 ) 992Proceeds from issuance of long-term debt 11,122 9,504Repayment of long-term debt ( 3,721 ) ( 62,918 )Payment to non-controlling interests ( 9,734 ) —Proceeds from issuance of preferred shares 2,314 3,073Redemption of preferred shares — ( 4,030 )Proceeds from issuance of common shares 46 15Redemption of common shares ( 13,006 ) ( 8,674 )

Cash flows related to financing activities ( 37,751 ) ( 62,038 )

Decrease in bank overdrafts 1,500 9,800Bank overdrafts, beginning of year ( 17,238 ) ( 27,038 )

Bank overdrafts, end of year $ ( 15,738 ) $ ( 17,238 )

Additional disclosuresInterest paid $ 16,447 $ 16,724Income taxes 15,608 3,842



Notes to Consolidated Financial Statements


[All tabular amounts are in thousands of dollars.]

BUSINESS DESCRIPTIONLa Coop fédérée [“La Coop”] was established under a special Act of the Province of Québec. It is active mainly in Marketing Operations and Supply Operations. Marketing Operations focuses on the processing and sale of pork and poultry products. Supply Operations provides farmers with goods and services to support their farming operations, and distributes and sells petroleum products and services.

SIGNIFICANT ACCOUNTING POLICIESThe consolidated financial statements of La Coop have been prepared by management in accordance with Canadian generally accepted accounting principles. The prepa-ration of consolidated financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The conso-lidated financial statements have, in management’s opinion, been properly prepared within reasonable limits of materiality and within the framework of the accounting policies summarized below.

Basis of consolidation The consolidated financial statements include the accounts of La Coop fédérée, its wholly owned subsidiaries and majority-owned subsidiary Olymel L.P. They also include La Coop’s interest in its joint ventures, owned directly or via its subsidiary Olymel L.P., accounted for using the proportionate consolidation method.

InventoriesRaw materials and supply inventories are valued at the lower of cost established in accordance with the first in, first out method and net realizable value. Goods in process and finished goods inventories are valued at the lower of cost under the first in, first out, or the average cost method, depending on the segment and net realizable value.

InvestmentsInterests in entities subject to significant influence are accounted for under the equity method and other long-term investments are accounted for based on their financial asset classification.

Impairment of assets

Financial assets

Allowance for doubtful accountsAccounts receivable carried at amortized cost are subject to continuous impairment review and are classified as impaired when, in the opinion of La Coop, there is reasonable doubt that credit related losses have occurred taking into consideration all circumstances known at the review date.

Allowances for credit lossesInvestments in the cooperatives classified as financial assets available for sale are written down if analyses of their financial reports show they are experiencing financial difficulties.

Mortgage loans and notes receivable carried at amortized cost are subject to continuous impairment review and are classified as impaired when, in the opinion of La Coop, there is reasonable doubt as to the ultimate collectibility of a portion of principal and interest. An impairment is established by analyzing certain financial ratios of these entities.

Long-lived assetsLong-lived assets held for use are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment is assessed by comparing the carrying amount of an asset with its expected future net undiscounted cash flows from use together with its residual value. If such assets are considered to be impaired, the impairment charge is measured by the amount by which the carrying amount of the assets exceeds their fair value. An impairment loss is recognized and presented in the consolidated statement of earnings and the carrying amount of the asset is adjusted to its fair value.

Property, plant and equipmentProperty, plant and equipment are stated at cost. They are depreciated over their useful life on a straight-line basis at the following rates:

Pavement 4% to 20%Buildings 3 1/3% to 10%Machinery and equipment 5% to 33 1/3%Automotive equipment 6 2/3% to 33 1/3%Leasehold improvements Lease term

GoodwillGoodwill represents the excess of the purchase price over the fair value of net assets acquired.

Goodwill is accounted for at cost and amortized on a straight-line basis over a period generally not exceeding 20 years. At each balance sheet date, La Coop evaluates whether there has been a permanent impairment in value of the carrying amount of goodwill. In doing so, La Coop determines the recoverability of goodwill based on an estimate of the undiscounted cash flows over the remaining amortization period of each business to which the goodwill relates.

The goodwill of subsidiary Olymel L.P. is tested for impairment annually or more frequently if events or changes in circumstances indicate a possible impairment. Goodwill is tested for impairment annually using a two-step test. Under the first step, the fair value of a reporting unit is compared with its carrying amount. If the fair value is greater than the carrying amount, no impairment is deemed to exist and the second step is not required. If the fair value is less than the carrying amount, the second test must be performed whereby the implied fair value of the reporting unit’s goodwill must be estimated. The implied fair value of goodwill is the excess of the fair value of the reporting unit over the fair value of the identifiable net assets of the reporting unit. Any impairment of the carrying amount in relation to the fair value is charged to consolidated earnings in the year in which the loss is incurred.



Notes to Consolidated

Financial Statements


SIGNIFICANT ACCOUNTING POLICIES [CONT’D]

Other assets

TrademarksTrademarks are stated at cost. They are amortized on a straight-line basis over a period of 15 years.

Client lists Client lists are stated at cost. They are amortized on a straight-line basis over a period of seven years.

Rights Rights consist of production rights and exclusive supply rights. They are accoun-ted for at cost and amortized on a straight-line basis over a 10-year period for production rights and over a 20-year period for exclusive supply rights.

Deferred chargesDeferred charges include the costs related to a client supply contract and are amortized on a straight-line basis over a period of six years.

SoftwareSoftware and information technology development project costs are amortized on a straight-line basis over periods of three to eight years. The amortization of information technology development projects begins at project completion.

Research and developmentResearch and development costs are expensed in the consolidated statement of earnings in the year in which they are incurred.

Long-lived asset retirement obligationsThe fair values of estimated asset retirement obligations are recorded as liabilities when the obligations are incurred pursuant to a legal obligation related to a long-lived asset retirement. The associated cost is capitalized as part of the cost of the related asset. Over time, the liabilities are accreted for the change in their present value and the initial capitalized costs are depreciated over the useful lives of the related assets. The related accretion is recorded in cost of sales and selling and administrative expenses, and the depreciation charge is included in depreciation of property, plant and equipment.

Revenue recognitionRevenues are recognized when the finished products are shipped to clients and collection is reasonably assured.

Foreign currency translationTransactions in foreign currencies are translated into Canadian dollars using the temporal method. Under this method, monetary items in the consolidated balance sheet are translated at the rates of exchange prevailing at year-end while non-monetary items are translated at the rates prevailing on the transaction dates. Revenue and expense items are translated at the rates of exchange prevailing on the transaction dates. Gains and losses on translation of foreign currencies are accounted for in consolidated earnings.

Employee future benefits

La Coop has a number of defined benefit and defined contribution plans providing pension and post-retirement benefits to most of its employees. Defined benefit pension plans are based on either average career earnings or average final earnings. Certain pension benefits are indexed according to economic conditions.

Post-retirement benefits offered by La Coop to its retired employees include health care benefits and life insurance.

The cost of pension and post-retirement benefits earned by employees is determined using actuarial calculations under the projected benefit method prorated on service based on management’s best long-term assumptions of salary escalation, the retirement and termination ages of employees and estimated health care costs.

For the calculation of the expected long-term rate of return on plan assets, these assets are measured at fair value. Accrued benefit obligations are discounted based on current market interest rates.

Past service costs arising from plan amendments are deferred and amortized on a straight-line basis over the average remaining service period of active employees at the amendment date.

Actuarial gains or losses arise from the difference between the actual long-term rate of return on plan assets for a period and the expected rate of return on plan assets for that period, or from changes in the actuarial assumptions used to determine the accrued benefit obligation. The excess of net actuarial gains and losses over 10% of the greater of accrued benefit obligations and the fair value of plan assets is recorded in consolidated earnings over the average remaining service period of active employees. The average remaining service period of active employees covered by the four pension plans ranges from nine years to 13 years and the average remaining service period of active employees covered by the early retirement program ranges from one year to seven years. The average remaining service period of active employees covered by the other post-retirement benefits plan is 14 years and 15 years.

Patronage refundsThe amount and terms of payment of patronage refunds are determined by the Board of Directors after year-end. Patronage refunds are calculated based on members’ purchased volumes and are accounted for in the year to which they relate. Where patronage refunds are paid in shares, such shares are considered to be issued at the year-end preceding the Board of Directors’ resolution.

Financial instrumentsFinancial instruments have been classified in one of the following asset categories: held-for-trading, available-for-sale, held-to-maturity, and loans and receivables. Liabi-lities have been classified under one of the two following categories: held-for-trading or other financial liabilities. Financial instruments are initially measured at fair value and subsequent measurements depend on their classification.





Financial instruments [cont’d]La Coop has classified them as follows:

Accounts receivable are classified under loans and receivables and are initially measured at fair value. Subsequent measurements are recorded at amortized cost according to the effective interest rate method.

Bank overdrafts, short-term borrowings, accounts payable and accrued liabilities and patronage refunds payable are classified as other financial liabilities and are initially measured at fair value. Subsequent measurements are recorded at amortized cost according to the effective interest rate method.

Investments in cooperatives presented in investments are classified as available-for-sale and are measured at cost since they have no quoted market price in an active market. Investments in entities subject to significant influence accounted for using the equity method are excluded from the standards. Mortgage loans and notes receivable are classified under loans and receivables and are initially measured at fair value. Subsequent measurements are recorded at amortized cost according to the effective interest rate method.

Preferred shares and long-term debt are classified under other financial liabilities and are initially measured at fair value. Subsequent measurements are recorded at amortized cost according to the effective interest rate method. For La Coop, this measurement is generally equal to cost due either to the use of a floating rate for certain borrowings or because management believes that the fair value of fixed-rate borrowings does not differ greatly from their carrying value given the imminent maturity of some and the rates that could be obtained currently by La Coop for borrowings with similar conditions and maturities.

Interest income and expense from financial assets and liabilities are recognized under financial expenses in the consolidated statement of earnings. Gains and losses related to financial assets and liabilities are recognized under cost of sales and selling and administrative expenses. When related to disposition, these gains and losses are recognized under gains (losses) on disposal of assets.

Transaction costsLong-term debt transaction costs are capitalized and netted against the carrying value of the related financial liability. They are amortized at cost using the effective interest rate method.

Derivative financial instrumentsIn accordance with its risk management strategy, La Coop uses derivative financial instruments to manage foreign exchange risks, risks related to certain commodity prices and interest rate risks. The derivative financial instruments consist of foreign exchange contracts, foreign exchange swaps, commodity forward contracts and interest rate swaps. La Coop does not use derivative financial instruments for speculative purposes.

Hedge accounting is used where La Coop documents its cash flow hedging relationships and risk management objectives and strategy, and demonstrates that they are sufficiently effective at the hedge’s inception and throughout the hedge period.

The derivative financial instruments that La Coop chose to designate as cash flow hedging items are classified under financial assets and liabilities available-for-sale. They are measured at fair value, which is the approximate amount that might be obtained in settlement of such instruments at prevailing market rates. Gains and losses resulting from remeasurement at year-end are reported in other comprehensive income. The ineffective portion, if any, is recognized in the consolidated statement of earnings. The amounts recognized in other comprehensive income are reclassified to the consolidated statement of earnings when the hedged item affects earnings. The gain or loss portion of a reclassified hedging item is reported as an adjustment to the revenues from or the expense of the related hedged item. Realized gains and losses on these contracts are presented in cost of sales and selling and administrative expenses.

Foreign exchange contracts and swapsLa Coop often sells and buys outside Canada, mainly in US dollars, yen and Australian dollars. To manage foreign exchange risk, La Coop uses foreign exchange contracts and currency swaps. Gains and losses on foreign exchange contracts and swaps entered into to hedge future cash flow transactions are accounted for in other comprehensive income and reclassified to earnings when these transactions occur.

Interest rate swapLa Coop also uses an interest rate swap to manage interest rate risk. Gains and losses on the interest rate swap entered into to hedge future cash flow transactions are accounted for in other comprehensive income and reclassified to earnings when the hedged item affects earnings.

A hedging relationship is terminated if the hedge ceases to be effective, and the unrealized gain or loss on the related derivative financial instrument is recognized in consolidated earnings along with subsequent changes in the fair value of the derivative financial instrument.

Derivative financial instruments that are not designated as hedge items are classified under financial assets and liabilities held-for-trading. They are measured at fair value, which is the approximate amount that might be obtained in settlement of such instruments at prevailing market rates. Gains and losses resulting from remeasurement at year-end are reported in the statement of consolidated earnings.







Derivative financial instruments [cont’d]

Commodity forward contractsLa Coop often buys and sells grain to cover certain identifiable future risks on the price of these commodities. La Coop does not use hedge accounting for commodity forward contracts. Therefore, gains and losses on these contracts, realized or not, are presented in cost of sales and selling and administrative expenses.

Interest rate swapLa Coop also uses an interest rate swap to manage interest rate risk. La Coop does not use hedge accounting for this derivative financial instrument. Therefore, gains and losses on these contracts are recognized under financial expenses.

Environmental obligationsEnvironmental costs related to current operations are expensed or capitalized according to their nature. Current costs caused by past events that do not generate future revenues are charged to consolidated earnings in the current year. Liabilities are recorded when costs are likely to be incurred and may be reasonably estimated.

Income taxesLa Coop follows the liability method of accounting for income taxes. Future income tax assets and liabilities are recognized for the future tax consequences of temporary differences between the carrying value and tax bases of assets and liabilities. Future income tax assets and liabilities are measured using substantively enacted income tax rates applicable in the years in which the temporary differences are expected to reverse. A valuation allowance is recorded to reduce the carrying amount of future income tax assets, when it is more likely than not that such assets will not be realized.

Year-endLa Coop’s year-end is the last Saturday of October. The year ended October 31, 2009 includes 53 weeks and that ended October 25, 2008 includes 52 weeks.

1. CHANGES TO ACCOUNTING POLICIES

RECENT CHANGES TO ACCOUNTING POLICIESOn October 26, 2008, La Coop adopted two new sections issued by the Canadian Institute of Chartered Accountants.

InventoriesSection 3031, Inventories, replaces Section 3030, Inventories. The new section prescribes measurement of inventories at the lower of cost and net realizable value, with disclosure of the method for determining cost and its subsequent expensing, including the allocation of general expenses and other costs to inventories. Under Section 3031, the allocation of fixed production overhead is based on normal capacity and unallocated overhead is expensed. The section further stipulates that previous write-downs of inventories to net realizable value must be reversed when the value of inventories subsequently increases. It also sets out more restrictive guidance on the cost formulas used to assign costs to inventories and additional disclosure requirements. The adoption of this standard had no significant impact on the consolidated financial statements of La Coop.

Goodwill and intangible assetsSection 3064, Goodwill and Intangible Assets, replaces Section 3062, Goodwill and Other Intangible Assets, Section 3450, Research and Development Costs, and EIC-27, Revenues and Expenditures During the Pre-operating Period. This section sets out the standards for recognizing, measuring and presenting information applicable to good-will and intangible assets. The adoption of this standard had no significant impact on the consolidated financial statements of La Coop.

Financial instrumentsSection 3862, Financial Instruments – Disclosures, was amended in June 2009, to include additional disclosure requirements about fair value measurements of financial instruments and to enhance liquidity risk disclosure requirements for publicly accountable enterprises. The amendments are effective for annual financial statements for fiscal years ending after September 30, 2009. The adoption of this standard had no significant impact on the consolidated financial statements of La Coop.

FUTURE CHANGES TO ACCOUNTING POLICIESIn September 2009, the Accounting Standards Board approved the final accounting standards for private enterprises. This means that private enterprises like La Coop fédérée could prepare their financial statements in accordance with Canadian generally accepted accounting principles by adopting International Financial Reporting Standards applicable for publicly accountable enterprises or Canadian GAAP for private enterprises. La Coop is currently assessing the impact of these new standards on its consolidated financial statements.




2. BUSINESS ACQUISITIONOn December 31, 2008, La Coop acquired all the shares of a company operating in Supply Operations for a total consideration of $56,202,000. This consideration is subject to a purchase price adjustment based on the operating results of the acquired company for its fiscal year ended December 31, 2008. This acquisition was accounted for using the purchase method and consolidated since the acquisition date. The preliminary purchase price allocation is summarized as follows:

Net assets acquiredCurrent assets $ 153,460Future income tax assets 888Property, plant and equipment 17,929Goodwill 17,957Other long-lived assets 1,498

Total assets acquired 191,732

Current liabilities 133,092Long-term debt 1,743Other long-term liabilities 695

Total liabilities assumed 135,530

Consideration paidCash $ 56,202

Negotiations are currently underway to finalize the purchase price. When a final agreement is reached with the vendors, any purchase price adjustment will be disclosed to reflect the consideration paid and the final allocation of actual net assets acquired.

3. OPERATING EXPENSES

Operating expenses include the following items:

2009 2008

Cost of inventories $ 3,602,706 $ 3,318,497Amortization of property, plant and equipment 49,155 46,854Amortization of goodwill 1,731 1,114Amortization of other assets 2,824 1,435Amortization of transaction costs 454 918Interest on short-term borrowings 3,470 307Interest on long-term debt 12,245 14,789Interest on preferred shares 536 572Interest income ( 2,022 ) ( 1,610 )

Interest income and expense calculated under the effective interest rate method are $869,000 [$1,427,000 in 2008] and $16,705,000 [$16,586,000 in 2008], respectively, for financial assets and liabilities using this valuation method.






4. PATRONAGE REFUNDSAt their meeting on January 14, 2010, in accordance with the provisions of the Act governing La Coop, the directors declared refunds of $15,000,000 to be paid from earnings for the year. They authorized the refunds to be paid in the following proportions: 2009 2008

Cash $ 3,000 $ 6,000Class B-1 common shares 3,000 6,000Class D-1 common shares 9,000 18,000

$ 15,000 $ 30,000

The consolidated financial statements reflect the directors’ resolution.

5. INCOME TAXESThe significant components of the income tax expense are as follows: 2009 2008

Current $ 8,834 $ 10,423Future 1,912 179

Income taxes $ 10,746 $ 10,602

The reconciliation of income tax expense with the amount obtained from multiplying earnings after patronage refunds by the statutory income tax rates is summarized as follows:

Earnings before patronage refunds and income taxes $ 53,346 $ 70,992Patronage refunds 15,000 30,000

Earnings for the calculation of income tax expense $ 38,346 $ 40,992

Income taxes at combined federal and provincial rates of 30.71% [31.63% in 2008] $ 11,776 $ 12,966Decrease in future income taxes due to a change in rates ( 1,904 ) ( 3,217 )Effect of non-deductible expenses for tax purposes 867 939Other items 7 ( 86 )

Income taxes $ 10,746 $ 10,602




5. INCOME TAXES [CONT’D]The significant components of future income tax assets and liabilities are as follows: 2009 2008

Non-deductible provisions and reserves for tax purposes $ 3,190 $ 2,542Inventories ( 2,697 ) ( 2,937 )Taxes related to other accumulated comprehensive income 188 1,516Other items – net ( 288 ) ( 129 )

Current future income tax assets $ 393 $ 992

Excess of carrying amount over tax basis:

Property, plant and equipment $ ( 20,470 ) $ ( 19,026 )Investments ( 1,814 ) ( 1,615 )Other assets ( 328 ) ( 369 )Employee future benefits 3,043 2,907Patronage refunds carried forward 619 896

Long-term future income tax liabilities $ ( 18,950 ) $ ( 17,207 )

6. INVENTORIESInventories are as follows: 2009 2008

Marketing inventories $ 144,886 $ 141,959Supply inventories 148,829 139,185

$ 293,715 $ 281,144

An inventory write-down of $15,375,000 was recognized as an expense during the year [$11,172,000 in 2008].

Marketing inventories are pledged as collateral for long-term debt [note 12].

7. INVESTMENTS 2009 2008

Investments in entities subject to significant influence $ 28,872 $ 24,795

Investments in cooperativesShares and other securities of supply cooperatives 912 814Shares and other securities of affiliated cooperatives 2,199 864

3,111 1,678

Mortgage loans and notes receivable 6,463 4,211

38,446 30,684Investments – current portion 2,064 757

$ 36,382 $ 29,927






8. PROPERTY, PLANT AND EQUIPMENT Accumulated Net carrying 2009 Cost depreciation amount

Land $ 23,449 $ — $ 23,449Pavement 12,280 7,986 4,294Buildings 356,230 140,810 215,420Machinery and equipment 627,845 422,048 205,797Automotive equipment 33,092 24,710 8,382Leasehold improvements 8,589 6,071 2,518

$ 1,061,485 $ 601,625 $ 459,860

Accumulated Net carrying 2008 Cost depreciation amount

Land $ 19,400 $ — $ 19,400Pavement 10,735 6,840 3,895Buildings 328,821 125,505 203,316Machinery and equipment 582,180 372,783 209,397Automotive equipment 23,888 17,503 6,385Leasehold improvements 8,438 5,674 2,764

$ 973,462 $ 528,305 $ 445,157

In fiscal 2008, La Coop decided to sell the building housing the head office. The net carrying value of this building as at October 31, 2009 was $21,699,000 [$21,690,000 in 2008] and the related mortgage loan was $12,582,000 [$13,262,000 in 2008].

9. GOODWILL Accumulated Net carrying 2009 Cost depreciation amount

$ 77,330 $ 17,734 $ 59,596


$ 58,996 $ 15,823 $ 43,173




10. OTHER ASSETSOther assets are as follows: Accumulated Net carrying 2009 Cost depreciation amount

Trademarks $ 5,419 $ 1,809 $ 3,610Client lists 5,327 2,770 2,557Rights 13,566 6,311 7,255Software 11,063 4,423 6,640Deferred charges 2,297 1,579 718

$ 37,672 $ 16,892 $ 20,780


Trademarks $ 4,935 $ 1,458 $ 3,477Client lists 4,336 2,248 2,088Rights 14,350 6,791 7,559Software 7,677 3,159 4,518Deferred charges 2,200 1,212 988

$ 33,498 $ 14,868 $ 18,630

Software and information technology development projects are internally developed.

11. SHORT-TERM BORROWINGSShort-term borrowings stem from the demand credit facilities of a subsidiary and certain joint ventures.

The subsidiary’s demand credit facility, renewable annually, and drawn under bank overdrafts, advances, letters of credit and standby letters of credit, totalled $12,000,000 in 2009, subject to a maximum of $6,000,000 under letters of credit and standby letters of credit. Bank overdrafts as at October 31, 2009 stood at $2,070,000 [$6,341,000 as at October 25, 2008], and bore interest at the prime rate, or 2.25% [4.34% as at October 25, 2008]. La Coop is joint and several guarantor for all amounts owing under this agreement.

The joint ventures’ demand credit facility at fixed and floating rates, renewable annually, totalled $62,500,000, of which $34,674,000 was drawn as at October 31, 2009. Floating interest rate advances bore interest at the prime rate plus 0.5%, representing an interest rate of 2.75% as at October 31, 2009. Fixed interest rate advances bore interest equivalent to the cost of funds plus 1.38%, representing an interest rate of 1.99% as at October 31, 2009. The joint venture credit facility is collateralized by movable hypothecs on all current assets and certain capital assets. The joint venturer is joint and several guarantor for all amounts owing under comfort letters.






12. LONG-TERM DEBT 2009 2008

Credit facility1 drawn under margin loans at the prime rate and under bankers’ acceptances at rates ranging from 1.74% to 2.25% [3.75% to 4.44% in 2008], renewable in June 2011 $ 87,942 $ 77,537

Term credit, at a fixed rate of 6.29%, repayable in an annual principal instalment of $3,600,000, one instalment of $4,800,000 and three instalments of $7,200,000, from August 2011 through August 2015 30,000 30,000

Unsecured debenture, at a fixed rate of 6.72%, subordinated to the credit facility and repayable in an annual principal instalment of $5,000,000, one of $6,000,000 and two instalments of $7,000,000, from August 2012 through August 2015 25,000 25,000

Term note, at a fixed rate of 7.75%, repayable in blended monthly instalments of $263,621, maturing on January 1, 2018 19,235 20,839

Mortgage loans of the real estate subsidiary, secured by movable and immovable hypothecs, at the fixed rate of 5.55% and at a preferred rate of 2.25% as at October 31, 2009 [fixed rate of 5.51% and 5.61% in 2008], repayable in monthly principal instalments of $26,153 and $74,860 in 2009, maturing on October 31, 2011 [note 8] 12,582 13,262

Mortgage loan of a subsidiary, secured by a hypothec on a building and land of the subsidiary with a carrying value of $10,820,000 as at October 31, 2009 [$11,043,000 as at October 25, 2008], at the fixed rate of 7.76% in 2009 and 2008, repayable in blended monthly instalments of $83,404, maturing in March 2023 9,272 9,542

Mortgage loans and other debts, at rates ranging from 2.25% to 9% [4.51% to 9% in 2008], maturing between November 2009 and June 2019 4,887 5,694

Share of borrowings of joint ventures secured by movable hypothecs, at rates ranging from 0.9% to 3.25%, maturing between January 2010 and May 2017 2,421 –

Share of notes payable of a joint venture, secured by movable and immovable hypothecs of the joint venture with a net carrying value of $6,194,000, at the rate of 3.18% [rates ranging from 6.17% to 6.25% in 2008], maturing between April 2014 and February 2015 1,192 1,552

192,531 183,426Transaction costs ( 739 ) ( 1,232 )

191,792 182,194Long-term debt – current portion 8,343 7,850

$ 183,449 $ 174,344

1 La Coop has an overall revolving credit facility of $300,000,000. La Coop can use this credit facility as follows: US- and Canadian-dollar margin loans, bankers’ acceptances, LIBOR advances and letters of guarantee. The interest rate is based on a rate schedule that varies according to a financial ratio calculated quarterly on a consolidated basis.

The credit facility, the term credit and the term note, which totalled $137,177,000 as at October 31, 2009 [$128,376,000 as at October 25, 2008], are collateralized by a first rank hypothec over a majority of the tangible and intangible assets, both present and future, of the subsidiary Olymel L.P. and its subsidiaries.

La Coop’s long-term debt is subject to compliance with certain financial ratios based on La Coop’s consolidated financial statements. As at October 31, 2009, La Coop was in compliance with these financial ratios.

The principal repayments required over the next five years are as follows: 2010 – $8,343,000; 2011 – $105,728,000; 2012 – $12,799,000; 2013 – $16,288,000 $; 2014 – $17,419,000.




13. EMPLOYEE FUTURE BENEFITSTotal cash payments for employee future benefits, consisting of cash contributed by La Coop to its funded pension plans, cash payments directly to beneficiaries for its other unfunded benefit plans, and cash contributed to its defined contribution plans, were $14,089,000 in 2009 [$13,562,000 in 2008].

La Coop measures its accrued benefit obligations and the fair value of plan assets at each year-end. The most recent actuarial valuations of the pension funds for funding purposes were as of December 31, 2007. The actuarial valuation of the other post-retirement benefits was carried out as at October 25, 2008. The next required actuarial valuation will be as at December 31, 2010 for the pension plans and as at October 25, 2011 for the other post-retirement benefits.

The total cost for La Coop’s defined contribution plans was $7,013,000 in 2009 [$6,379,000 in 2008].

Information on La Coop’s pension plans and other post-retirement benefits is as follows:

Pension Other post-retirement 2009 plans benefits Total

Accrued benefit obligationsBalance, beginning of year $ 113,234 $ 15,877 $ 129,111Current service cost for the year 4,655 875 5,530Interest cost 7,673 1,109 8,782Benefits paid ( 6,888 ) ( 644 ) ( 7,532 )Plan amendments 1,458 — 1,458Actuarial losses 4,584 529 5,113

Balance, end of year 124,716 17,746 142,462

Plan assetsFair value, beginning of year 102,029 — 102,029Actual return on plan assets 13,672 — 13,672Employer contributions 6,432 644 7,076Employee contributions 548 — 548Benefits paid ( 6,888 ) ( 644 ) ( 7,532 )

Fair value, end of year 115,793 — 115,793

Funded status – plan deficit ( 8,923 ) ( 17,746 ) ( 26,669 )Unamortized net actuarial loss (gain) 8,328 ( 137 ) 8,191Unamortized past service cost 3,796 ( 232 ) 3,564

Employee future benefit asset (liability) $ 3,201 $ ( 18,115 ) $ ( 14,914 )

The employee future benefit asset (liability) in La Coop’s consolidated balance sheet is presented as follows:

Pension Other post-retirement plans benefits Total

Employee future benefit asset $ 17,306 $ — $ 17,306Employee future benefit liability ( 14,105 ) ( 18,115 ) ( 32,220 )







13. EMPLOYEE FUTURE BENEFITS [CONT’D] Pension Other post-retirement 2008 plans benefits Total

Accrued benefit obligationsBalance, beginning of year $ 129,801 $ 16,687 $ 146,488Current service cost for the year 5,297 806 6,103Interest cost 7,403 989 8,392Benefits paid ( 7,561 ) ( 570 ) ( 8,131 )Actuarial gains ( 21,706 ) ( 2,035 ) ( 23,741 )

Balance, end of year 113,234 15,877 129,111

Plan assetsFair value, beginning of year 124,935 — 124,935Actual return on plan assets ( 22,494 ) — ( 22,494 )Employer contributions 6,523 570 7,093Employee contributions 540 — 540Benefits paid ( 7,475 ) ( 570 ) ( 8,045 )

Fair value, end of year 102,029 — 102,029

Funded status – plan deficit ( 11,205 ) ( 15,877 ) ( 27,082 )Unamortized net actuarial loss (gain) 10,643 ( 679 ) 9,964Unamortized past service cost 2,954 ( 260 ) 2,694


The employee future benefit asset (liability) in La Coop’s consolidated balance sheet is presented as follows:

Pension Other post-retirement plans benefits Total

Employee future benefit asset $ 15,464 $ — $ 15,464Employee future benefit liability ( 13,072 ) ( 16,816 ) ( 29,888 )


The breakdown of the fair value of La Coop’s pension plan assets is as follows: 2009 2008

Equity securities 64 % 57 %Debt securities 36 43

100 % 100 %




13. EMPLOYEE FUTURE BENEFITS [CONT’D]Other post-retirement benefit plans are unfunded. The accrued benefit obligations and fair value of defined benefit plan assets, whose accrued benefit obligations exceed plan assets, amount to $60,205,000 and $40,100,000, respectively [$65,725,000 and $46,714,000 in 2008].

The significant actuarial assumptions used to assess La Coop’s employee future benefit obligations and plan assets as at October 31, 2009 and October 25, 2008 are as follows:

Other post-retirement Pension plans benefits 2009 2008 2009 2008Discount rate 6.50% 6.75% 6.50% 6.75%Expected long-term return for plan assets 6.25% 6.50% n/a n/aRate of compensation increase 4.00% 4.00% 4.00% 4.00%

For valuation purposes, an 8% annual growth rate in the cost of covered prescription drugs was assumed for the first year in 2008, decreasing by 0.5% annually over the next 10 years to remain at 2.5% thereafter, as of 2017. The growth rate in prescription drug costs is 7.5% as at October 31, 2009 [12.5% in 2008]. The growth rate in other health care costs was set at 4% as at October 31, 2009 [5.5% in 2008].

Assumed health care cost rate trends have a significant effect on the amounts reported for the health care plans. A one-percentage point change in assumed health care cost trend rates would have the following effects for:

Increase Decrease 2009 2008 2009 2008Total of service cost and interest cost $ 103 $ 148 $ ( 93 ) $ ( 115 )Accrued benefit obligations 789 1,306 ( 721 ) ( 1,211 )






13. EMPLOYEE FUTURE BENEFITS [CONT’D]La Coop’s net employee future benefit cost recognized in consolidated earnings for the year is as follows:


Current service cost for the year, net of employee contributions $ 4,107 $ 875 $ 4,982Interest cost 7,673 1,109 8,782Actual return on plan assets ( 13,672 ) — ( 13,672 )Actuarial losses for the year 4,584 529 5,113

Elements of employee future benefit cost beforeadjustments to recognize the long-term nature thereof 2,692 2,513 5,205

Adjustments to recognize the long-term nature ofemployee future benefit cost:

Difference between expected return and actualreturn on plan assets for the year 7,293 — 7,293

Difference between actuarial loss recognized for the yearand actual actuarial loss on accrued benefit obligation for the year ( 4,423 ) ( 543 ) ( 4,966 )

Difference between amortization of past servicecost for the year and actual plan amendments for the year 617 ( 27 ) 590

3,487 ( 570 ) 2,917

Employee future benefit cost $ 6,179 $ 1,943 $ 8,122




13. EMPLOYEE FUTURE BENEFITS [CONT’D]


Current service cost for the year, net of employee contributions $ 4,757 $ 806 $ 5,563Interest cost 7,403 989 8,392Actual return on plan assets 22,494 — 22,494Actuarial gains for the year ( 21,706 ) ( 2,035 ) ( 23,741 )

Elements of employee future benefit cost beforeadjustments to recognize the long-term nature thereof 12,948 ( 240 ) 12,708

Adjustments to recognize the long-term nature ofemployee future benefit cost:

Difference between expected return and actualreturn on plan assets for the year (30,601 ) — ( 30,601 )

Difference between actuarial gain recognized forthe year and actual actuarial gain on accruedbenefit obligation for the year 21,644 2,106 23,750

Difference between amortization of past servicecost for the year and actual plan amendments for the year 505 ( 28 ) 477

( 8,452 ) 2,078 ( 6,374 )

Employee future benefit cost $ 4,496 $ 1,838 $ 6,334






14. SHARE CAPITALLa Coop’s share capital is variable and unlimited with regard to the number of shares issuable. The rights, restrictions and conditions relating to each type of share are determined by the Board of Directors. The share capital consists of:

Preferred sharesClass A preferred shares, with a par value of $1, non-voting and redeemable at their par value upon a decision of the Board of Directors. They are issued upon the conver-sion of common shares held by a member who does not fulfill the commitments of its contract with La Coop or if the contract commitments are not renewed.

Preferred shares with a par value of $10, issued to members and employees of La Coop in accordance with the Québec Cooperative Investment Plan, bearing interest at a rate determined by the Board of Directors. These shares are redeemable at their par value upon a decision of the Board of Directors. The 2004, 2005 and 2008 issues are redeemable by La Coop only as of the fifth year following issuance. The 2006 and 2007 issues are redeemable at the option of La Coop as of the fifth year following issuance, or at the holder’s option, provided that certain conditions are met.

Common sharesClass A common shares, with a par value of $25. Holding such shares is an essential condition to qualify as a member and obtain voting rights. They are redeemable at their par value upon a decision of the Board of Directors.

Class B common shares, with a par value of $1, non-voting and redeemable at their par value upon a decision of the Board of Directors. However, the Board of Directors

cannot redeem Class B common shares if there are shares outstanding other than Class B-1, D-1 common shares or Class A common shares. These shares were issued to members as partial payment of patronage refunds.

Class B-1 common shares, with a par value of $1, non-voting and redeemable at their par value upon a decision of the Board of Directors. However, the Board of Directors may not redeem Class B-1 common shares if there are any outstanding Class B, D and D-1 common shares. These shares were issued to members as partial payment of patronage refunds.

Class D common shares, with a par value of $1, non-voting and redeemable at their par value upon a decision of the Board of Directors. These shares were issued to members as partial payment of patronage refunds.

Class D-1 common shares, with a par value of $1, non-voting and redeemable at their par value upon a decision of the Board of Directors. However, the Board of Directors may not redeem Class D-1 common shares if there are any outstanding Class B and D common shares. These shares were issued to members as partial payment of patronage refunds.

Class auxiliary members common shares, with a par value of $25, non-voting and redeemable at their par value upon a decision of the Board of Directors.

At year-end, the issued and fully paid shares were as follows:

Number Amount 2009 2008 2009 2008

PREFERRED SHARES Class A 1,398,981 — $ 1,399 $ —Cooperative Investment Plan

2004 series, redeemable as of 2010, 4.5% 350,140 350,140 3,501 3,5012005 series, redeemable as of 2011, 4% 396,969 396,969 3,970 3,9702006 series, redeemable as of 2012, 4.75% 155,853 155,853 1,559 1,5592007 series, redeemable as of 2013, 4.75% 307,332 307,332 3,073 3,0732008 series, redeemable as of 2014, 4.75% 231,449 — 2,314 —

2,840,724 1,210,294 15,816 12,103Preferred shares shown as a financial liability ( 813,325 ) ( 463,185 ) ( 8,133 ) ( 4,632 ) 2,027,399 747,109 $ 7,683 $ 7,471

COMMON SHARES Class A 33,841 32,749 $ 847 $ 820Class B 39,971,402 40,807,865 39,971 40,807Class B-1 14,060,194 11,223,377 14,060 11,223Class D 2,924,165 15,910,057 2,924 15,910Class D-1 37,062,169 28,465,284 37,062 28,464auxiliary members 180 140 5 4 94,051,951 96,439,472 94,869 97,228 96,079,350 97,186,581 $ 102,552 $ 104,699




14. SHARE CAPITAL [CONT’D]This year’s transactions related to share capital were carried out for cash considerations with the exception of patronage refunds paid in the form of shares. These transactions were as follows:

Number Amount 2009 2008 2009 2008

PREFERRED SHARESBalance, beginning of year 1,210,294 1,305,935 $ 12,103 $ 13,060

Issued:Preferred shares, Cooperative Investment Plan 231,449 307,332 2,314 3,073Preferred shares, Class A 1,398,981 — 1,399 — 1,630,430 307,332 3,713 3,073

Redeemed:Preferred shares, Cooperative Investment Plan — ( 402,973 ) — ( 4,030 ) 2,840,724 1,210,294 15,816 12,103Preferred shares, 2004 series – current portion ( 350,140 ) — ( 3,501 ) —

Balance, end of year 2,490,584 1,210,294 $ 12,315 $ 12,103

COMMON SHARESBalance, beginning of year 96,439,472 81,118,742 $ 97,228 $ 81,887

Issued:Class A common shares 1,795 1,137 45 28Patronage refunds paid in Class B-1 common shares 3,000,000 5,995,286 3,000 5,996Patronage refunds paid in Class D-1 common shares 9,000,000 17,990,596 9,000 17,991Class auxiliary members common shares 40 20 1 — 12,001,835 23,987,039 12,046 24,015

Redeemed:Class A common shares ( 703 ) ( 319 ) ( 18 ) ( 8 )Class B common shares ( 836,463 ) — ( 836 ) —Class B-1 common shares ( 163,183 ) — ( 163 ) —Class D common shares ( 12,985,892 ) ( 8,665,990 ) ( 12,986 ) ( 8,666 )Class D-1 common shares ( 403,115 ) — ( 402 ) — ( 14,389,356 ) ( 8,666,309 ) ( 14,405 ) ( 8,674 )

Balance, end of year 94,051,951 96,439,472 $ 94,869 $ 97,228

On September 9, 2009, the directors authorized a preferred share issue pursuant to the Cooperative Investment Plan, 2009 series, as of November 30, 2009, under which 355,557 preferred shares were issued for a cash consideration of $3,555,570. On September 9, 2009, the directors also resolved to redeem, commencing on November 30, 2009, 350,140 preferred shares issued under the Cooperative Investment Plan, 2004 series, for a cash consideration of $3,501,400.

On September 2, 2008, the directors also authorized a preferred share issue pursuant to the Cooperative Investment Plan, 2008 series, as of November 30, 2008, under which 223,738 preferred shares were issued for a cash consideration of $2,237,380. In addition, on January 14, 2009, the directors resolved to redeem 12,930,330 Class D common shares issued between 2001 and 2005 for a cash consideration of $12,930,330.






15. ACCUMULATED OTHER COMPREHENSIVE INCOMEAccumulated other comprehensive income includes only financial instruments designated as cash flow hedges. Changes arising during the year were as follows:

2009 2008

Balance, beginning of year $ ( 3,222 ) $ 353Change in fair value during the year,

net of taxes amounting to $1,329 ($1,682 in 2008) 2,825 ( 3,575 )

Balance, end of year $ ( 397 ) $ ( 3,222 )

The total amount of unrealized gains and losses will be reclassified to the consolidated statement of earnings during the following fiscal year.

16. NET CHANGE IN NON-CASH WORKING CAPITAL RELATED TO OPERATIONSThe net change in non-cash working capital related to operations is determined as follows:

2009 2008

Accounts receivable $ 22,968 $ ( 48,860 )Inventories 99,131 ( 57,434 )Prepaid expenses ( 3,556 ) 2,267Income taxes payable ( 8,850 ) 6,581Accounts payable and accrued liabilities ( 62,799 ) 90,580Patronage refunds payable ( 3,000 ) 4,500

$ 43,894 $ ( 2,366 )

17. COMMITMENTS AND CONTINGENCIES

[a] Operating leasesLa Coop has entered into long-term operating leases for buildings, machinery and automotive equipment. The future minimum lease payments of La Coop under these leases total $31,589,000 and are as follows for the coming years: 2010 – $9,053,000; 2011 – $6,954,000; 2012 – $5,294,000; 2013 – $3,571,000; 2014 – $1,476,000; 2015 and thereafter – $5,241,000.

[b] Repurchase of the shares of non-controlling shareholdersOn October 30, 2009, a group of non-controlling shareholders of a subsidiary of La Coop, holding 17.6% of the shares of this subsidiary gave notice of its intention to exercise, commencing on May 1, 2010, a priority right to sell all its shares to another group of non-controlling shareholders. Should this group not exercise its right, La Coop is required to buy back these shares. The sale of the shares as well as the payment of their sale price may be made in four equal and consecutive annual instalments or sooner at La Coop’s discretion. This same group of non-controlling shareholders will retain all of its rights until the transfer of the last portion of its shares. The purchase price of the shares will be determined using a formula established between the parties.

In addition, this other group of non-controlling shareholders of a subsidiary of La Coop holding 22% of the shares of said subsidiary has, commencing on October 31, 2012, the right to sell all of its shares to La Coop, which is obligated to buy them back. The sale of the shares as well as the payment of their sale price may be made in 10 annual instalments according to a predetermined repurchase agreement whose terms and conditions are defined in the partnership agreement of the subsidiary, or sooner, at La Coop’s discretion. This same group of non-controlling shareholders will retain all of its rights until the transfer of the last portion of its shares.

[c] Claims and lawsuitsIn the normal course of business, various claims and lawsuits are brought against La Coop. Legal proceedings are often subject to numerous uncertainties and it is not possible to predict the outcome of individual cases. In management’s opinion, La Coop has made adequate provision for or has adequate insurance to cover all claims and lawsuits, and their settlement should not have a significant negative impact on La Coop’s financial position.




18. GUARANTEESIn the normal course of business, La Coop has entered into agreements that contain features which meet the definition of a guarantee. These agreements provide for indemnifica-tion and guarantees to counterparties in transactions such as operating leases and security contracts.

These agreements may require La Coop to compensate third parties for costs and losses incurred as a result of various events including breaches of representations and warranties, loss of or damages to property, and claims that may arise while providing services.

Notes 11, 12 and 17 to the consolidated financial statements provide information relating to some of these agreements. The following constitutes additional disclosure.

Operating leasesLa Coop and its subsidiaries have general indemnity clauses in many of their movable and immovable property leases whereby they, as lessee, agree to indemnify the lessor against liabilities related to the use of the leased property. These leases mature at various dates through October 25, 2027. The nature of the agreements varies based on the contracts and therefore prevents La Coop from estimating the total potential amount it would have to pay to lessors. Historically, La Coop has not made any significant payments under such agreements. Furthermore, La Coop and its subsidiaries have property insurance protecting them against such potential situations.

Security contractsUnder letters of guarantee with financial institutions and insurance companies, La Coop has commitments amounting to $26,248,000 as at October 31, 2009.

As at October 31, 2009 and October 25, 2008, no amounts were recognized in respect of the above-mentioned agreements.

19. FINANCIAL INSTRUMENTS

[a] Derivative financial instruments In the normal course of business, La Coop uses a number of derivative financial instruments, such as foreign exchange contracts, foreign exchange swaps, commodity forward contracts and interest rate swaps to reduce its exposure to exchange rate, commodity price and interest rate fluctuations. These instruments are used exclusively for risk manage-ment purposes.

Foreign exchange contracts and swapsThe following table sets out the nominal amounts at the reporting dates with respect to foreign exchange contracts with maturities of less than one year:

Average exchange rate

Type Nominal amount in foreign currency [in thousands] 2009 2008

Sale US$4,205 [US$16,194 in 2008] 1.1503 1.1842Purchase US$53,928 [US$57,511 in 2008] 1.0761 1.1027Sale ¥2,564,266 [¥4,442,197 in 2008] 0.011679 0.010445Sale A$23,013 [A$38,575 in 2008] 0.9266 0.8267Sale NZ$1,323 [NZ$3,257 in 2008] 0.7771 0.7269

No amounts have been recognized in the consolidated statement of earnings for ineffective foreign exchange contracts and swaps.

Interest rate swapsIn 2009 and 2008, drawn lines of credit totalling $25,000,000 were subject to interest rate swaps at rates between 3.6% and 3.84%, maturing between June 2011 and May 2013.

Grain forward contractsIn the normal course of business, La Coop has entered into purchase and sale contracts expiring in less than one year with its clients to set various grain prices. As at October 31, 2009, La Coop was committed to sell 87,343 metric tonnes of grain [25,050 metric tonnes in 2008] in the amount of $26,742,000 [$32,987,000 in 2008]. La Coop has recognized a $3,207,000 loss [a $641,000 gain in 2008] relating to grain price fluctuations in the consolidated statement of earnings. La Coop has sufficient grain in inventory to deliver on these commitments.






19. FINANCIAL INSTRUMENTS [CONT’D]

[a] Derivative financial instruments [cont’d]

Grain forward contracts [cont’d]

La Coop also entered into forward contracts on the price of various grains expiring in less than one year to reduce its exposure to fluctuations in grain prices. As at October 31, 2009, La Coop was committed to buy 23,385 metric tonnes of grain [42,100 metric tonnes in 2008] in the amount of $3,411,000 [$5,633,000 in 2008]. La Coop recorded a gain of $590,000 [$3,706,000 in 2008] in the consolidated statement of earnings.

[b] Carrying amount and fair value of financial instrumentsThe carrying amounts and fair values of financial instruments are as follows:

2009 2008 Carrying Fair Carrying Fair amount value amount value Investments and other assetsLoans and receivables

Mortgage loans and notes receivable $ 6,463 $ 6,463 $ 4,211 $ 4,211Available-for-sale

Investments in cooperatives 3,111 n/a 1,678 n/aDerivatives designated as cash flow hedges

Foreign exchange contracts and swaps ( 1,367 ) ( 1,367 ) ( 9,141 ) ( 9,141 )Interest rate swaps ( 645 ) ( 645 ) ( 482 ) ( 482 )

Derivatives classified as held-for-tradingCommodity forward contracts ( 2,613 ) ( 2,613 ) 1,737 1,737Interest rate swaps ( 427 ) ( 427 ) ( 290 ) ( 290 )

Long-term debtOther financial liabilities

Credit facility $ 87,942 $ 87,942 $ 77,537 $ 77,537Term credit 30,000 30,148 30,000 30,031Unsecured debenture 25,000 23,796 25,000 25,189Term note 19,235 19,165 20,839 21,627Mortgage loans of the real estate subsidiary 12,582 12,345 13,262 12,662Mortgage loan of a subsidiary 9,272 9,364 9,542 10,148Mortgage loans and other debts 4,887 4,886 5,694 5,693Share of borrowings of joint ventures 2,421 2,421 — —Share of notes payable of a joint venture 1,192 1,192 1,552 1,552

$ 192,531 $ 191,259 $ 183,426 $ 184,439

Fair value measurements are classified in accordance with a hierarchy which reflects the significance of inputs to the measurement of fair value. The fair value hierarchy consists of three levels. In Level 1, inputs consist of quoted prices in active markets for identical assets or liabilities. Under Level 2, inputs comprise quoted prices in active markets for similar assets or liabilities, or valuation techniques whose principal inputs are based on observable market data. In Level 3, inputs used in measuring assets or liabilities are not based on observable market data. La Coop uses a fair value hierarchy consisting of a single level: Level 2. Derivatives designated as cash flow hedges and derivatives classified as held-for-trading are recorded in Level 2 of the fair value hierarchy.

The fair value of long-term debt is determined by discounting future contractual cash flows at rates that La Coop could obtain as at the balance sheet date for borrowings under similar terms and conditions and with similar maturities.





[b] Carrying amount and fair value of financial instruments [cont’d]The fair value of the derivative financial instruments reflects the estimated amounts La Coop would receive (or pay) to terminate open contracts at year-end. The prices obtained by La Coop’s bankers are compared with closing capital market prices.

The fair value of the preferred shares cannot be established since the timing of these outflows cannot be determined at a reasonable cost.

[c] Nature and extent of risks arising from financial instruments and related risk management

Credit riskCredit risk corresponds to the risk of a financial loss for La Coop if one party to a financial instrument is not able to fulfill its obligations. The maximum exposure to credit risk for La Coop corresponds to the carrying value of the following financial instruments:

Loans and receivablesIn the normal course of business, La Coop evaluates the financial position of its clients on a regular basis and examines the credit history of new clients. To protect itself against financial losses related to credit risk, La Coop has a policy that sets out credit conditions for various areas of operations. Specific credit limits are set for each sector and client and reviewed periodically. The allowance for doubtful accounts is based on the client’s specific credit risk and historical trends. Moreover, La Coop holds security on the assets and investments of certain clients in the event of default. La Coop believes the credit risk regarding receivables to be minimal due to the diversification of its clients and their industry segments.

DerivativesCredit risk related to derivative financial instruments is limited to unrealized gains, if any. La Coop is likely to incur losses if parties fail to meet their commitments related to these instruments. However, La Coop views this risk as minimal or non-existent since it deals only with highly rated financial institutions.

Liquidity riskLiquidity risk corresponds to the risk that La Coop will find it difficult to meet its obligations related to financial liabilities.

La Coop manages this risk by drawing up detailed financial projections and developing a long-term acquisitions strategy. Treasury management at the consolidated level requires constant monitoring of expected cash inflows and outflows based on La Coop’s consolidated financial projections. Liquidity risk is evaluated using historical volatility, seasonal needs, current financial obligations and long-term debt obligations.







[c] Nature and extent of risks arising from financial instruments and related risk management [cont’d]

Liquidity risk [cont’d]

The maturities of financial liabilities as at October 31, 2009 are as follows:

Less than 1 to 4 to More than 1 year 3 years 10 years 10 years Total

Accounts payable and accrued liabilities $ 364,729 $ — $ — $ — $ 364,729Long-term debt 8,343 134,816 48,633 — 191,792Derivative financial instruments 1,891 645 427 — 2,963Letters of guarantee 26,248 — — — 26,248 $ 401,211 $ 135,461 $ 49,060 $ — $ 585,732

The maturities of financial liabilities as at October 25, 2008 are as follows:

Less than 1 to 4 to More than 1 year 3 years 10 years 10 years Total

Accounts payable and accrued liabilities $ 353,287 $ — $ — $ — $ 353,287Long-term debt 7,850 110,339 61,010 2,995 182,194Derivative financial instruments 11,673 482 290 — 12,445Letters of guarantee 35,899 — — — 35,899 $ 408,709 $ 110,821 $ 61,300 $ 2,995 $ 583,825

Market risk

Foreign exchange riskLa Coop often makes purchases and sales abroad. La Coop’s policy is to maintain the purchase costs and selling prices of its business transactions by hedging its positions using derivative financial instruments. To manage foreign exchange risk, La Coop uses foreign exchange contracts and currency swaps.

La Coop’s main foreign exchange risks are covered by a centralized treasury department. Foreign exchange risks are managed in accordance with the foreign exchange risk management policy. The policy aims to protect La Coop’s operating earnings by eliminating the exposure to currency fluctuations. The foreign exchange risk management policy prohibits speculative transactions.

As at October 31, 2009, foreign exchange contracts used by La Coop for hedging cash flows have a negative fair value of $1,367,000 [negative fair value of $9,141,000 in 2008]. All of La Coop’s forward foreign exchange contracts are considered effective hedges. As a result, a 1% increase or decrease in exchange rates between currencies used in La Coop’s transactions as at October 31, 2009 would not have had a considerable impact on its consolidated net earnings. Fluctuations in exchange rates would have an impact on the fair value of forward foreign exchange contracts reported in accumulated other comprehensive income. The sensitivity to exchange rates represents the exposure to foreign exchange risk for La Coop’s financial instruments.






Market risk [cont’d]

Foreign exchange risk [cont’d]As at October 31, 2009 and October 25, 2008, a 1% increase or decrease in exchange rates would have the following impact on accumulated other comprehensive income presented under equity, assuming that all other variables remain unchanged:

Increase Decrease Increase Decrease

2009 2009 2008 2008

Impact of changes in the fair value of derivatives on other comprehensive income

C$/US$ $ 122 $ ( 122 ) $ 367 $ ( 367 )C$/¥ ( 308 ) 308 ( 597 ) 597C$/A$ ( 224 ) 224 ( 304 ) 304C$/NZ$ ( 10 ) 10 ( 23 ) 23

Interest rate riskInterest rate risk relating to financial assets and liabilities results from changes in interest rates which La Coop may experience. La Coop believes that mortgage loans and notes receivable, bank overdrafts, short-term borrowings and variable-rate long-term debt give rise to a cash flow risk as they could have a negative impact on La Coop in the event of changes in interest rates.

Centralized treasury management aims to match and bring about an appropriate combination of fixed and variable-rate borrowings to minimize the impact of interest rate fluctuations. La Coop uses derivative financial instruments, namely interest rate swaps. La Coop holds interest rate swaps in the amount of $25,000,000 in 2009 and 2008 for managing cash flows.

As at October 31, 2009 and October 25, 2008, a 100 basis-point increase or decrease in the interest rate curve would have the following impact on net earnings and on accumulated other comprehensive income presented under equity, assuming that all other variables remain unchanged.

Increase Decrease Increase Decrease

2009 2009 2008 2008

Impact on net earnings of changes in interest rates on other variable-rate financial liabilities $ ( 21 ) $ 21 $ ( 44 ) $ 44

Impact on net earnings of a change in interest rates resulting in a change in the fair value of non-designated hedges 337 ( 337 ) 431 ( 431 )

Impact on other comprehensive income of a change in the fair value of derivatives designated as cash flow hedges 235 ( 235 ) 381 ( 381 )

Other price risks

Input price fluctuation risksInput prices vary depending on several external factors while extreme price volatility stems from continually changing supply markets. La Coop often buys and sells grain. La Coop’s policy is to maintain the purchase costs and selling prices of its business transactions by hedging its positions using derivative financial instruments. To manage exposure to changes in commodity prices, La Coop uses forward contracts.








Other price risks [cont’d]

Input price fluctuation risks [cont’d]As at October 31, 2009, La Coop’s commodity forward contracts had a negative value of $2,613,000 [gain of $1,737,000 as at October 25, 2008]. All contracts used by La Coop are considered effective hedges but are not documented for hedge accounting purposes. As a result, a 1% increase in commodity prices, assuming all other variables remained unchanged, would have decreased La Coop’s consolidated net earnings by $44,000 [$159,000 as at October 25, 2008]. Conversely, a 1% decrease in commodity prices, assu-ming all other variables remained unchanged, would have increased La Coop’s consolidated net earnings by $44,000 [$159,000 as at October 25, 2008].

20. CAPITAL MANAGEMENTFor financing purposes, La Coop must comply with a financial ratio related to its capital structure, namely the Funded Debt-to-Capitalization ratio. Issuance of preferred shares to employees under the Cooperative Investment Plan is one of La Coop’s financing tools to achieve its capitalization targets.

During fiscal 2009 and 2008, La Coop was in compliance with the prescribed Funded Debt-to-Capitalization financial ratio which has to be lower than 50% as per the agreement. The ratio is calculated quarterly in accordance with the agreement, and stood at 32.1% as at October 31, 2009 and 34.1% as at October 25, 2008.

Pursuant to the regulations adopted under the Cooperatives Act, La Coop must also distribute its earnings in the form of patronage refunds. Patronage refunds made to members are prorated according to the transactions carried out by each. The amount and payment method for patronage refunds and the redemption of shares issued are authorized by La Coop every year. Furthermore, under this law with which La Coop has complied, it cannot redeem or buy back shares if the redemption or repurchase compromises its financial stability.

21. INTEREST IN JOINT VENTURESLa Coop’s consolidated financial statements include its share of the results, financial position and cash flows of its joint ventures, as follows:

2009 2008

Consolidated Statement of EarningsRevenues $ 269,492 $ 62,587Operating expenses 268,269 62,570Net earnings 1,223 17

Consolidated Balance SheetCurrent assets 95,263 9,329Long-term assets 25,792 11,900Current liabilities 72,596 7,211Long-term liabilities 19,566 11,397

Consolidated Statement of Cash FlowsCash flows related to:

Operating activities 9,177 926Investing activities (2,959 ) (527 )Financing activities (15,321 ) (340 )




22. SEGMENTED INFORMATIONLa Coop has two reportable segments: Marketing Operations and Supply Operations. Common costs and operations related to the head office building are combined under Other Segments. These segments are managed separately since they require specific business strategies. All of La Coop’s assets are located in Canada.

The various segments’ accounting policies are the same as those described under significant accounting policies. La Coop evaluates performance based on earnings before patro-nage refunds and income taxes. La Coop accounts for its intersegment revenues and transfers at the exchange amount. The geographical breakdown of revenues is based on the clients’ billing location.

Marketing Supply Other 2009 Operations Operations Segments Consolidated

REPORTABLE SEGMENTSThird-party revenues $ 2,092,849 $ 1,827,114 $ — $ 3,919,963Intersegment transfers 12 17,591 — 17,603Total revenues 2,092,861 1,844,705 — 3,937,566Financial expenses 8,611 5,799 273 14,683Amortization of property, plant and equipment and other assets 38,019 14,051 1,640 53,710Share of results of entities subject to significant influence — 5,305 ( 4 ) 5,301Earnings before patronage refunds and income taxes 20,631 51,010 ( 18,295 ) 53,346Segment assets 652,939 523,986 44,591 1,221,516Goodwill 30,960 17,684 10,952 59,596Investments in entities subject to significant influence — 28,966 ( 94 ) 28,872Additions to property, plant and equipment 27,270 16,945 2,165 46,380

Marketing Supply Other 2008 Operations Operations Segments Consolidated

REPORTABLE SEGMENTSThird-party revenues $ 2,033,557 $ 1,572,544 $ — $ 3,606,101Intersegment transfers 102 18,286 — 18,388Total revenues 2,033,659 1,590,830 — 3,624,489Financial expenses 13,913 553 510 14,976Amortization of property, plant and equipment and other assets 37,975 9,816 1,612 49,403Share of results of entities subject to significant influence — 4,679 3 4,682Earnings before patronage refunds and income taxes 45,029 39,538 ( 13,575 ) 70,992Segment assets 668,465 429,573 45,465 1,143,503Goodwill 30,960 372 11,841 43,173Investments in entities subject to significant influence — 24,885 ( 90 ) 24,795Additions to property, plant and equipment 39,698 14,299 3,351 57,348






22. SEGMENTED INFORMATION [CONT’D]

Revenues by geographical area

2009 2008

Third-party revenues in Canada $ 3,129,687 $ 2,838,091

Third-party revenues outside Canada:United States 266,361 214,606Japan 223,935 198,236Russia 35,071 103,774Other 264,909 251,394

790,276 768,010

Total third-party revenues $ 3,919,963 $ 3,606,101

23. RESTRUCTURING COSTSRestructuring costs consist of costs arising from operating commitments and maintenance costs regarding facilities targeted by the 2006 restructuring of Olymel’s pork processing and marketing operations. The balance of restructuring costs charged to accounts payable and accrued liabilities amounted to $2,794,000 as at October 31, 2009 [$3,058,000 in 2008]. Changes in the provision for restructuring costs in 2009 are as follows:

Balance as at October 25, 2008 $ 3,058Expenditures ( 324 )Adjustments 60

Balance as at October 31, 2009 $ 2,794

24. GAIN ON AVAILABLE-FOR-SALE ASSETSOn September 17, 2008, La Coop acquired 50% of the shares of the real estate joint venture Immeuble 9001 l’Acadie L.P. for a total consideration of $3,362,000, increasing its ownership stake in the entity to 100%. This acquisition was accounted for using the purchase method and consolidated since the acquisition date. The share of net assets acquired is allocated as follows:

Share of net assets acquiredCurrent assets $ 180Property, plant and equipment 12,000

Total assets acquired 12,180

Current liabilities 628Long-term debt 6,355

Total liabilities assumed 6,983

5,197Consideration paidCash 3,362

Gain on available-for-sale assets $ 1,835

La Coop has allocated the consideration paid to the share of asset items acquired and liabilities assumed. Following this allocation, the net amount attributed to asset items acquired and the liabilities assumed is greater than the purchase cost. Given that La Coop has decided to dispose of its property, plant and equipment, this excess amount should not be allocated to assets earmarked for sale but recognized as a gain on available-for-sale assets in the consolidated statement of earnings.

25. COMPARATIVE FIGURESCertain 2009 figures have been reclassified to conform to the presentation adopted in 2008.

Financial Review


UNAUDITED 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000

Operations [in thousands of dollars]

Revenues $ 3,919,963 $ 3,606,101 $ 3,286,795 $ 3,175,705 $ 3,141,860 $ 2,908,842 $ 2,755,096 $ 2,480,291 $ 2,431,329 $ 2,003,739

Financial expenses 14,683 14,976 20,604 18,717 12,965 9,925 12,714 11,364 15,504 11,855

Amortization 53,710 49,403 49,522 53,197 41,969 36,165 38,100 34,521 29,768 26,148

Earnings (loss) from continuing operations 53,346 70,992 40,587 (21,599) 42,463 35,456 26,136 42,481 62,690 25,786

Patronage refunds 15,000 30,000 10,000 — 8,500 12,000 8,203 17,200 16,200 7,000

Income taxes 10,746 10,602 7,770 (11,408) 1,551 7,887 4,348 8,222 8,617 5,848

Discontinued operations — — — — — — — — (161) (6,593)

Net earnings (loss) 27,600 30,390 22,817 (10,191) 32,412 15,569 13,585 17,059 37,712 6,345

Financial position [in thousands of dollars]

Working capital $ 191,178 $ 181,421 $ 43,846 $ 164,721 $ 197,750 $ 139,486 $ 127,981 $ 123,742 $ 122,390 $ 91,967

Property, plant and equipment, net book value 459,860 445,157 428,953 442,865 451,177 305,328 309,145 309,477 287,269 194,220

Total assets 1,221,516 1,143,503 1,014,948 1,004,006 1,058,252 808,765 762,288 769,788 721,081 590,981

Convertible debentures, preferred shares and equity** 412,482 383,528 338,754 305,890 321,928 284,711 261,689 283,163 258,461 213,885

Financial ratiosWorking capital ratio 1.4 1.4 1.1 1.6 1.7 1.5 1.5 1.5 1.5 1.4

Interest coverage 4.6 5.7 3.0 (0.2) 4.3 4.6 3.1 4.7 5.0 2.4

Debt/equity ratio* ** 36:64 33:67 41:59 49:51 47:53 40:60 45:55 50:50 51:49 55:45

Earnings (loss) before patronage refunds and income taxes/revenues 1.4% 2.0% 1.2% ( 0.7 )% 1.4% 1.2% 0.9% 1.7% 2.6% 0.9%

Reserve/convertible debentures, preferred shares and equity** 73.2% 71.5% 72.0% 72.2% 71.8% 69.8% 70.0% 59.9% 59.0% 53.7%

Convertible debentures, preferred shares and equity**/total assets** 33.8% 33.5% 33.4% 30.5% 30.4% 35.2% 34.3% 36.8% 35.8% 36.2%

Number of employees 11,336 11,175 11,072 11,895 12,287 9,587 9,644 10,096 9,340 8,041

* The debt figure in the debt/equity ratio includes the convertible debentures and the equity figure includes the preferred shares.

** Accumulated other comprehensive income as well as the related financial instruments have been excluded from the ratio calculations.

List of Locations


SUPPLY OPERATIONSLa Coop fédérée900 de l’Acadie BoulevardMontréal, QuébecH4N 3H7

Animal production sector

Feedmills and warehousesJolietteLévisNew Liskeard, OntarioSaint-Jacques de MontcalmSt-Isidore de Prescott, Ontario

Micro premix plantLévis

Sogeporc genetic hog farmsLauriervilleNotre-Dame-de-LourdesSaint-ApollinaireSaint-RomainSaint-Narcisse-de-RimouskiTrinité-des-Monts

Research farmsFrampton (farrowing barn)Saint-Jean-Baptiste-de-Rouville (broilers and layers)Saint-Hermas-de-Mirabel (nursery and finishing barn)Adstock (gilt)

HatcheriesSaint-JudeVictoriaville

Breeding farms (poultry)Saint-JudeWickhamVictoriaville

Breeding farms (broiler breeders)LanoraieSaint-Germain-de-GranthamSaint-Jean-Baptiste-de-RouvilleSaint-Lin-LaurentidesWickham

Crop production sector

Research FarmSaint-Hyacinthe

Distribution centresLongueuilSainte-CatherineSillery

Companies6 Agrocentres (50 %)Fertichem (50 %)SQS inc.Agronomy Company of Canada Ltd

Grains sector

Office and distribution centreMontréalSillery

Joint venture enterpriseSillery Distribution Centre Inc. (50%)

SubsidiaryElite Grain Inc., Napierville

Quality sectorAgrifood laboratoryLongueuil

Seeds laboratoryLongueuil

Petroleum sector

Office and sales officesBrossardDrummondvilleMontréalPointe-aux-TremblesRivière-du-LoupSaint-HyacintheSaint-RomualdTrois-RivièresVictoriaville

79 distribution agents8 bulk stations185 service stations

Joint venture enterpriseGroupe pétrolier Norcan inc. (33 %)

Hardware and farm machinery sector

Distribution centreTrois-Rivières

Sales outlets171 La Coop or Unimat hardware centres60 independent outlets190 farm machinery and forestry dealers200 agricultural parts dealers35 Inov decoration centers

Cooperative member services and Coop agricultural centre

OfficesMontréalSillery

Co-op agricultural centre AgriEst, St-Isidore de Prescottand St-Albert, Ontario

MARKETING OPERATIONSOlymel L.P.2200 Léon-Pratte Avenue Suite 400Saint-Hyacinthe, Québec J2S 4B6

Sales officesBouchervilleRed Deer, AlbertaToronto, OntarioAustraliaSouth KoreaTokyo, Japan

Distribution centresBouchervilleRed Deer, AlbertaSaint-Jean-sur-RichelieuToronto, Ontario

Hog sector

Slaughterhouses and cutting plants PrincevilleRed Deer, AlbertaSaint-Esprit de MontcalmSaint-HyacintheVallée-Jonction

Processing plantsAnjouCornwall, OntarioDrummondvillePrincevilleSaint-Henri de BellechasseTrois-Rivières

Poultry sector

Slaughterhouses and cutting plantsBerthiervilleSaint-Damase

Processing plantsToronto, OntarioSaint-HyacintheSaint-Jean-sur-Richelieu (2)

Joint venture enterprisesSunnymel GP inc.Unidindon inc.Volaille Giannone inc.

Other operationsTransport Transbo inc.Machinerie Olymel (1998) inc.Transbo exportation inc.

Affiliated Cooperatives


Citadelle, coopérative de producteurs de sirop d’érablePlessisville

Coopérative agricole de la Baie des ChaleursCaplan

Coopérative agricole du TémiscouataNotre-Dame-du-Lac

Coopérative de consommation de Saint-AlexisSaint-Alexis-de-Matapédia

Coopérative de Saint-Quentin ltéeSaint-Quentin (New Brunswick)

Groupe Dynaco, coopérative agroalimentaireLa Pocatière

La Coop AgrilaitSaint-Guillaume

La Coop AgriscarTrois-Pistoles

La Coop AgrivertSaint-Barthélemy

La Coop AgrivoixLa Malbaie

La Coop AgrodorThurso

La Coop AllianceSaint-Éphrem-de-Beauce

La Coop ChambordChambord

La Coop ComaxSaint-Hyacinthe

La Coop ComptonCompton

La Coop CoopPlusSaint-Narcisse

La Coop CovilacBaie-du-Febvre

La Coop de l’AssomptionL’Assomption

La Coop des AppalachesLaurierville

La Coop des Bois-FrancsVictoriaville

La Coop des CantonsCoaticook

La Coop des deux rivesNormandin

La Coop des FrontièresSainte-Martine

La Coop DisraeliDisraeli

La Coop Dupuy et Ste-Jeanne d’Arc Dupuy

La Coop ExcelGranby

La Coop Fermes du NordMont-Tremblant

La Coop FramptonFrampton

La Coop GracefieldGracefield

La Coop Grains D’OrMétabetchouan–Lac-à-la-Croix

La Coop Ham NordHam-Nord

La Coop Île-aux-GruesL’Isle-aux-Grues

La Coop JonquièreJonquière

La Coop La PatrieLa Patrie

La Coop Lac-MéganticLambtonLac-Mégantic

La Coop LangevinSainte-Justine

La Coop MatapédienneAmqui

La Coop MontmagnyMontmagny

La Coop NominingueNominingue

La Coop ParisvilleParisville

La Coop Pont-RougePont-Rouge

La Coop Pré-VertTingwick

La Coop Profid’OrJoliette

La Coop PurdelLe Bic

La Coop Rivière-du-SudSaint-François-de-la-Rivière- du-Sud

La Coop Saint-Alexandre- de-KamouraskaSaint-Alexandre-de-Kamouraska

La Coop Saint-DamaseSaint-Damase

La Coop Sainte-HélèneSainte-Hélène-de-Bagot

La Coop Sainte-JulieSainte-Julie

La Coop Saint-HubertSaint-Hubert-de-Rivière-du-Loup

La Coop Saint-UbaldSaint-Ubalde

La Coop SeigneurieSaint-Narcisse-de-Beaurivage

La Coop SquatecSquatec

La Coop St-André-d’ActonActon Vale

La Coop St-CasimirSaint-Casimir

La Coop St-Côme-LinièreSaint-Côme-Linière

La Coop St-Denis-sur-RichelieuSaint-Denis-sur-Richelieu

La Coop Ste-CatherineSainte-Catherine-de-la- Jacques-Cartier

La Coop Ste-JustineSainte-Justine

La Coop Ste-MartheSainte-Marthe

La Coop St-FabienSaint-Fabien

La Coop St-Isidore-d’AucklandSaint-Isidore-de-Clifton

La Coop St-Jacques-de-LeedsSaint-Jacques-de-Leeds

La Coop St-MéthodeAdstock

La Coop St-PamphileSaint-Pamphile

La Coop St-PatriceSaint-Patrice-de-Beaurivage

La Coop UnicoopSainte-Hénédine

La Coop UniforceNapierville

La Coop Val-NordLa Sarre

La Coop VerchèresVerchères

La Coop WeedonWeedon

La Coopérative Cartier LtéeRichibucto (New Brunswick)

La Coopérative de Baie Ste-Anne LtéeBaie Sainte-Anne (New Brunswick)

La Coopérative de Caraquet LtéeCaraquet (New Brunswick)

La Coopérative de Rogersville LtéeRogersville (New Brunswick)

La Coopérative de Saint-Louis LtéeSaint-Louis-de-Kent (New Brunswick)

La Fromagerie coopérative St-Albert inc.Saint-Albert (Ontario)

Magasin CO-OP de Havre- aux-MaisonsHavre-aux-Maisons

Magasin CO-OP de PlessisvillePlessisville

Magasin CO-OP de Ste-PerpétueSainte-Perpétue de l’Islet

Magasin CO-OP de Saint-LudgerSaint-Ludger

Magasin CO-OP de St-SamuelLac-Drolet

Magasin CO-OP de St-VictorSaint-Victor

Magasin CO-OP St-GédéonSaint-Gédéon-de-Beauce

Nutrinor, coopérative agro-alimentaire du Saguenay Lac St-JeanSaint-Bruno

Société coopérative agricole de Saint-Adrien-d’IrlandeSaint-Adrien-d’Irlande

Société coopérative de Lamèque LtéeLamèque (New Brunswick)

Auxiliary membersCoopérative des producteurs de pommes de terre de Péribonka-Ste-Marguerite-MariePéribonka

Coopérative d’utilisation de machinerie agricole de la Rivière du BicLe Bic

Coopérative d’utilisation de machinerie agricole de LauriervilleLaurierville

Coopérative d’utilisation de machinerie agricole de l’ÉrablePlessisville

Coopérative d’utilisation de machinerie agricole de l’Or BlancSaint-Georges-de-Windsor

Coopérative d’utilisation de machinerie agricole de Saint-FabienSaint-Fabien

Coopérative d’utilisation de machinerie agricole de St-CyprienSaint-Cyprien

Coopérative d’utilisation de machinerie agricole de Ste-Croix, St-ÉdouardSaint-Édouard de Lotbinière

Coopérative d’utilisation de machinerie agricole des RivièresSainte-Anne-de-la-Pérade

Coopérative d’utilisation de machinerie agricole Estrie-MontSaint-Joachim-de-Shefford

Coopérative d’utilisation de machinerie agricole et forestière du LacAlma

Coopérative d’utilisation de machinerie agricole Franco-AgriSainte-Anne-de-Prescott (Ontario)

Coopérative d’utilisation de machinerie agricole JeannoiseSaint-Gédéon

Coopérative d’utilisation de matériel agricole de la Petite-Nation et de la LièvrePlaisance

Coopérative d’utilisation de matériel agricole de LeclercvilleLeclercville

Coopérative d’utilisation de matériel agricole de St-SylvèreDeschaillons

Coopérative d’utilisation de matériel agricole des AulnaiesSaint-Jean-Port-Joli

Coopérative d’utilisation de matériel agricole l’Oie BlancheSaint-Pierre

Contents

Take up the dance!Dance is the focal point of this year’s Annual Report and Annual General Meeting. The financial report is more than a corporate document with no vision and no soul, and the annual meeting is more than a review of shareholder profit.

La Coop fédérée invites you to take up the dance. To be part of an established business and a dynamic network that measures everything it does against the guiding principles of respect, equity and commitment.

The first dance!To build the future and to honour the past, La Coop fédérée has the financial strength to support a passionate new generation of young agricultural producers.

Dancing to the rhythm of your dreams!La Coop fédérée has been anchored in the daily life of agricultural producers in Québec since its inception 88 years ago. Economic growth, social responsibility, ethical practices and environmental protection are its core values. The soundness of its business model is demonstrated by the ability of its network to meet the distinct needs of its clients across Québec. A winning formula, a sustainable formula. A formula that 90,000 members farmers and individuals across a hundred cooperatives apply to generate, share and grow wealth.

Dancing to a world beat!This dance, set to the rhythms of the world, is enriched by the diversity of the cultural communities that make up our society. They are the wellspring of La Coop fédérée’s future. New bonds are formed, giving rise to new ideas, new products and services from near and far. Business opportunities for our agricultural producers abound.

Dancing in harmony! From the earth to the kitchen table, from the earth to the boardroom tables of your cooperatives: you are tens of thousands members strong. Every day, as you grow your businesses and your network to meet consumer needs and tastes, you are part of the dance, you weave the steps.

It’s up to you. Take the first step, feel the beat – take up the dance. Put your creativity to work and build the future. For agriculture and for the cooperative movement.

Take up the dance!Together, we will build the future. Take up the dance with La Coop’s network and our sure steps will weave a strong tomorrow.

Dancing to the rhythm of your dreams!The ideal partner to take up the dance and weave great ideas, big or small, revolutionary or traditional, La Coop’s network is always there with customized service to meet evolving client needs.

Dancing to a world beat!La Coop’s network moves to the rhythms of the world, a cultural diversity that enriches our agricultural heritage.

Dancing in harmony!La Coop’s network, in tune with today’s consumer.

2 President’s Message

12 Cooperative Overview

18 Management Discussion and Analysis

30 Olymel Overview

38 Management Report

39 Auditors’ Report

40 Consolidated Balance Sheet

41 Consolidated Statement of Earnings and Reserve 41 Consolidated Statement of Comprehensive Income

42 Consolidated Statement of Cash Flows

43 Notes to Consolidated Financial Statements 69 Financial Review

70 List of Locations

71 Affiliated Cooperatives

Setting the rhythm!“We do not inherit the earth from our ancestors: we borrow it from our children.”


Take up the dance!Annual Repor t 2009

Head OfficeLa Coop fédérée9001 de l’Acadie BlvdSuite 200Montréal, Québec H4N 3H7

Telephone: 514 384-6450Fax: 514 858-2025

Websitewww.lacoop.coop

On peut obtenir la version française de ce rapport sur le site Internet de La Coop fédérée à l’adresse www.lacoop.coop ou obtenir une copie imprimée en communiquant avec le Service des communications au 514 384-6450, poste 3484.

Artistic Director/Graphic DesignerBernard DiamantInfographiePierre CadoretService de la publicité et de l’infographieLa Coop fédérée

Photo Credits Martine Doyon, Photographer (www.martinedoyon.com) Valérie Laliberté, Assistant

Colour Separation and Printing Imprimerie Mont-Roy

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