A L T E R N A S A V I N G S 2 0 0 5 A N N U A L S U M M A R Y2 >

VisionTo be the leader of co-operative financial services.

MissionDevelop and share an exceptional level of financial expertise that is:• tailored to member needs• accessible to all• supportive of local communities• and delivered by caring, professional employees.

ValuesPeople First, Excellence, Integrity

Board of DirectorsName Title Committee Attendance Other Boards that Director Serves on

Earl Campbell Chair Executive 9/9 Bloorview MacMillan School Authority, Ontario Public SchoolBoards’ Association, Consent and Capacity Board, Governmentof Ontario, Ontario Credit Union Charitable Foundation,Scarborough Training Centre International Inc.

Fred Gorbet Vice Chair Executive 7/9 Alterna Bank, Assuris, Lawyers Professional IndemnityCorporation, Credit Union Central of Ontario, North YorkHarvest Food Bank, Covenant House Toronto, Institute forResearch on Public Policy

Don Altman Director Executive 9/9 Ontario Natural Food Co-operative, Isabella Housing Resident’sCo-operative, Co-operative Resources Pool of Ontario

Richard Bertrand Director Executive 4/9 Alterna Bank

Gini Bethell Director Executive 7/9 Alterna Bank, Élisabeth Bruyère Research Institute

Penny Bethke Director Member Relations 7/7 None

Mary-Lu Brennan Director Member Relations 10/10 North York Tennis Association, Ontario Tennis Association

Ted Brown Director Member Relations 7/7 The Friends of the Merril Collection - Toronto Public Library

Bill Burleigh Director Finance and Audit 8/8 Brenyon Way Charitable Foundation, Ridgeford CharitableFoundation, Burnleigh Property Management Limited, W GBurleigh Management Services Inc.

Ken Chan Director Human Resources 7/9 None

Pierre Choquette Director Member Relations 7/7 Alterna Bank, Ottawa River Project Board of Directors,Pharmagap Advisory Committee

Gita Clarkson Director Human Resources 9/9 None

Gail Di Cintio Director Human Resources 9/9 Alterna Bank

James Frank Director Finance and Audit 9/11 Alterna Bank, Élisabeth Bruyère Research Institute,Canadian Forces Personnel Support Agency,Community Foundation of Ottawa-Carleton

David Kinsman Director Member Relations 5/7 Alterna Bank

Mel Lang Director Executive 9/9 Compass Charitable Foundation

Jeff May Director Finance and Audit 8/8 None

Richard Neville Director Finance and Audit 7/8 Alterna Bank, RCMH - MRCH Inc.,TGM Specialty Services Inc.

Richard Ranger Director Finance and Audit 8/8 Alterna Bank

John Richmond Director Member Relations 7/7 None

Peter Smith Director Human Resources 9/9 Alterna Bank

Anna Tosto Director Finance and Audit 9/9 Alterna Bank

Doug Thwaites Director Human Resources 6/8 None

Senior ManagementTeamGary SevenyPresident & ChiefExecutive Officer

Carl RamkerrysinghSenior Vice President,SME and AcquisitionStrategy & ChiefIntegration Officer

José GallantSenior Vice President,OrganizationalPerformance & ChiefFinancial Officer

Tom GregoriadesSenior Vice President,Service Delivery &Operations

Norman AyoubSenior Vice President,Marketing & BusinessDevelopment

Madeleine BrillantVice President,Corporate Affairs

Kimberley NeyVice President,Branch Operations

Jan MedlandVice President,OrganizationalEffectiveness

Credit CommitteeAlexandra WilsonChair

Johanne CharbonneauVice Chair

Bruce Hirst

Penny McCabe

Carla Pagliarello

Hugh Reilly

Stewart Robertson

Andrew Stabins

Martin Zablocki

Original photography:Helen Hiebert

Front cover images:Ryan, South Keys BranchMarva, South Keys BranchDiana, Bay Branch

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Growing Together

< 3

Dear Members,

On April 1, 2005 two strong and successful Ontario credit unions came together to create a new

co-operative force in the province—Alterna Savings and Credit Union Limited (“Alterna Savings”).

With the launch of Alterna Savings, we formed an organization that has combined the strengths of its

parts to provide members with better service, expanded products and expert financial advice, in the

Greater Toronto Area, Ottawa, North Bay, Pembroke and Kingston.

Since our launch in April, members have sometimes asked us, “What is Alterna Savings anyway?”

The answer is two-fold. In the midst of change for members and employees, Alterna Savings

is still the people and place that members trust for caring, professional service. At the same

time, Alterna Savings is growing into something more, with expanded access to accounts

and an enhanced product and service offering. Our Vision, Mission and Values Statements,

on the facing page, show where we want to take this new organization.

You might see some familiar faces throughout this summary. They are our members and

employees, now part of the new Alterna Savings family.

Alterna Savings is committed to leadership in co-operative financial services, to financial

and technological savvy, to being a valuable part of our members’ lives and communities,

and to operating according to our shared values.We hope you join us for the journey ahead.

Earl Campbell Gary M. SevenyBoard Chair (l) President & CEO (r)

Farzana,Bay Branch Jason, South Keys Branch

Pam, ElectronicCard Services Rhea, South Keys Branch

A L T E R N A S A V I N G S 2 0 0 5 A N N U A L S U M M A R Y4 >

Financial performance in 2005 shows that Alterna Savings

is putting down the roots of a solid fiscal base. Consolidated

assets closed at over $1.7 billion, with an additional

$313 million in off-balance sheet relationships, primarily

mutual funds and other investments purchased by

members. Growth in our consolidated credit portfolio

totaled $59 million since April 1, 2005. It was led by

commercial loans and mortgages as we continue to build

relationships with small and medium enterprises. Despite

competitive pressures, consolidated retail mortgages have

shown a healthy increase, bolstered by Alterna Savings’

leading mortgage rates throughout the fiscal year.

Consolidated deposit growth, coupled with off-balance

sheet mutual fund investments, has also been successful

with combined growth of over $45 million since the merger.

Consolidated net income, at $3.9 million, closed slightly

ahead of plan. Competitive pressures have kept interest

margins slim throughout the year, and other income has

decreased due to a declining market trend in ABM usage

and reduced profits on credit insurance programs, which had been unusually high in 2004. Offsetting

these challenges to revenue, loan losses continued at historically low levels, as seen in 2004, and

operating expenses were well controlled.

Theresa, Electronic Card Services

Our FinancialSnapshot

Laurie & Joan, Electronic Card Services

The integration of the two credit unions that make up

Alterna Savings—CS CO-OP and Metro Credit

Union—is also creating the roots upon which we will

grow. We often hear about take-overs and buy-outs in

the corporate world. It is less common to hear of

“mergers of equals” where parties bring together all

the aspects of their operations through a co-operative

process.

What do we mean by a merger of equals? We mean

we are building something new, guided by one all-

important question: “What is best for our members

and Alterna Savings?” We mean that we are bringing

together strengths from the past, the best available in

the marketplace and members’ feedback to create a

product and service offering that is fresh and vibrant

in the Ontario financial services marketplace.

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Combining Strengths,Putting Down

Roots

In 2005, 57 different integration initiatives were launched at Alterna Savings to undertake this exciting

task. Several initiatives have already been completed or substantially completed to benefit you, our

members. These include the delivery of seamless member service following April 1, 2005, the

formation of our Board of Directors and Committees, the creation of our Vision, Mission and Values

Statements and Strategic Plan, and the selection of new partners to provide enhanced services

to members.

Guided by a set of integration principles, we are navigating through a myriad of decisions to ensure

we travel the right path to integration. There may be bumps along the road, but we are committed

to overcoming them and emerging a stronger organization. We appreciate your support as we build

and grow.

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In 2007 we will have completed our

integration process, providing members

with one product and service offering on

one computer banking system. Together

we will move forward as Alterna Savings

to the benefit of members, employees

and communities.

South Keys Branch

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Growing Member Service

Alterna Savings is also growing in the way we provide service to our members. Member satisfaction

is the highest goal: we want members to have the best experience possible every time they contact

Alterna Savings—in person, by phone, online or by mail.

Surveys show that members have always valued our high quality and personal service. Going forward,

we want to ensure that our professional employees are assisting members with all their financial

needs, from basic transactions to loans and mortgages to complex investment advice and planning.

In fact, the most significant result of the merger has been the opportunity to better serve members,

and the benefits are already showing. In 2005 members have enjoyed:

• Increased access to accounts through an expanded network of 81 ABMs and 24 branches across central and eastern Ontario, as well as access through multiple remote channels: call centre, and online and automated telephone banking.

• Availability of bilingual (French/English) service to all members.

• Low rates and excellent service through our new Alterna MasterCard® credit card.

• Savings on home, auto and travel insurance through the selection of Canadian InsuranceAlliance as Alterna Savings’ provider of these insurance products.

• More mortgage and deposit optionsethrough the introduction of mortgage and deposit brokerages.p

• Opportunity for members’ voices to be heard through direct email access to their President & CEO, Member Town Hall meetings and other feedback mechanisms.

• Access to a federally-chartered bank. Alterna Bank is owned by Alterna Savings and operated by co-operative principles. Members can access the Bank’s unique financial solutions whether they live in Ontario or outside the province.

The year 2005 also saw the introduction of a new computer banking system to members of former

CS CO-OP. This state-of-the-art technology will serve Alterna Savings well into the future (former Metro

will convert to the new system in 2007). As with most major system conversions we are experiencing

a period of adjustment. We thank members for their patience as we work diligently to address

outstanding issues and look forward to bringing the benefits of the new technology to them.

On-going investment in the people, infrastructure and technology of Alterna Savings means that our

membership will continue to see the positive results. Watch as we move forward!

Shirley, Bay Branch

Shawn, South Keys Branch

Living by our values is nothing new for Alterna

Savings. Our co-operative roots go back to 1908,

when the Civil Service Savings and Loan Society,

the first Ontario credit union, was formed in

Ottawa. A strong commitment to democracy,

community support and social responsibility

continues to this day.

Our members guide us, and our focus on

democracy has only grown stronger in 2005.

Member Town Hall meetings were held in many

Alterna Savings’ locations—these are a great way

for the credit union to find out what is important

to members. And the first Alterna Savings Annual

General Meeting was held on April 11, 2006, in Ottawa and linked to Toronto by simultaneous

video conference.

Year one of Alterna Savings also saw a reconfirmation of our

commitment to community support and the Imagine Canada Program.

We have pledged to contribute 2% of our pre-tax profits annually to the

communities we serve through donations, events like the Do It for Dad! Run and Family Walk

benefiting prostate cancer care and research in Ottawa and more.

Community Economic Development has always been a credit union cornerstone and that commitment

also continues—through, for example, the Toronto-based Community Micro Loan Program, providing

micro entrepreneurs with small loans to help them build their businesses. And through the on-going

investment Alterna Savings makes in the economic prosperity of our members and by extension

local economies.

Finally, they say that what gets measured matters, and to that end Alterna Savings will be monitoring

our social and environmental performance through a social auditing and accountability reporting

process. With the spotlight firmly on our operations and activities we will be able to work on

continuous improvement in these areas.

A L T E R N A S A V I N G S 2 0 0 5 A N N U A L S U M M A R Y8 >

Susan Henry, Community Economic Development Specialist andCommunity Micro Loan Program member Panagiotis Tsiriotakis ofAcropolis Organics at the Bay Branch of Alterna Savings in Toronto.

Our Values Are Where We Live

What’s ahead in 2006? In 2006 we have two key focuses: the integration of Alterna Savings

and growth.

Throughout the year we will continue to move towards our goal of

providing all members with an integrated product and service line on

the same computer banking system. This task will be completed in

2007 and will mean exceptional, competitive and consistent products

and services for members. Other service improvements like the

expansion and consolidation of our call centre, or Member Service

Centre, in Toronto are in the works in 2006.

Growth will be achieved through reaching out and introducing the

new Alterna Savings to potential members. And we

will grow by reaching out to our current members,

showing them how we can be their full-service

financial institution. We are also focusing on new

profit-generating activities, but never at the expense

of member service.

Finally, we will also continue to highlight social

responsibility, integrating our programs and

communicating them to our membership and

the communities we serve.

So thank you very much for your on-going support.

And take a closer look—your new Alterna Savings is

here for you!

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Looking Forwardand Upward

Sapana, MemberService Centre

Julie,South Keys Branch

Vianney,South Keys Branch

Members,Bay Branch

Dave, Member Service Centre

Janet & Kristine, Bay Branch

Finan

Alterna SavingsConsolidated Balance Sheet (in thousands of dollars)

As at December 31

2005 2004

ASSETS

Cash and cash equivalents $ 180,472 $ 79,777

Investments 116,011 246,508

Loans, net of allowance for impaired loans 1,405,716 863,712

Property and equipment 31,298 23,544

Other assets 10,353 11,789

$ 1,743,850 $ 1,225,330

LIABILITIES AND MEMBERS’ EQUITY

Liabilities:

Deposits $ 1,597,208 $ 1,120,391

Future tax liability 1,810 1,645

Other liabilities 18,496 12,982

Membership shares 2,625 2,067

1,620,139 1,137,085

Members’ Equity:

Special shares 29,025 15,358

Contributed surplus 19,053 -

Reserves 75,633 72,887

123,711 88,245

$ 1,743,850 $ 1,225,330

A L T E R N A S A V I N G S 2 0 0 5 A N N U A L S U M M A R Y1 0 >

ncials

Alterna SavingsConsolidated Statement of Income and Reserves (in thousands of dollars)

Year ended December 31

2005 2004

Interest income $ 71,154 $ 53,358

Investment income 9,475 9,046

80,629 62,404

Interest expense 32,994 28,545

Net interest income 47,635 33,859

Loan costs 966 104

46,669 33,755

Other income 14,120 11,267

60,789 45,022

Operating expenses 54,726 39,016

Net income before integration costs and income taxes 6,063 6,006

Integration costs 1,314 -

Net income before income taxes 4,749 6,006

Provision for income taxes

Current 732 106

Future 165 1,010

897 1,116

Net income $ 3,852 $ 4,890

Reserves, beginning of year 72,887 68,637

Dividend on special shares (net of tax) 1,106 640

Reserves, end of year $ 75,633 $ 72,887

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The complete 2005 audited Financial Statements of Alterna Savings are available at www.alterna.ca.

Member images, Bay Branch

MembershipMembership is open to any person who resides or works in Ontario.

For more information, to request additional copies of this annual summary or to request the completefinancial statements of Alterna Savings or its subsidiaries: Alterna Bank, Alterna Realty Corporation or Alterna Holdings Inc., please contact:

Alterna Savings or Alterna Savings400 Albert Street 165 Attwell DriveOttawa, ON K1R 5B2 Toronto, ON M9W 5Y5

Telephone: 613.560.0100, 416.252.5621 or 1.877.560.0100 Email: query@alterna.caWebsite: www.alterna.ca

Alterna Savings Branches

Ottawa AreaAlbert: 400 Albert St.Bells Corners: 90K Robertson Rd.Billings Bridge Shopping Centre: 2269 Riverside Dr.Merivale: 1715 Merivale Rd.Orléans: 210 Centrum Blvd.St. Laurent Shopping Centre: 1200 St. Laurent Blvd.South Keys: 2300 Bank St.Sparks: 61 Sparks St.Tunney’s Pasture: R.H. Coats Building

Ottawa400 Albert St.

Alterna Bank Branches

Greater Toronto AreaBay: 800 Bay St.Bolton: Shopper’s Plaza, 1 Queensgate Blvd.Bramalea: Howden Plaza, 1-375 Howden Blvd.Brimley: 1173 Brimley Rd.Danforth: 1577 Danforth Ave.Malton: 2829 Derry Rd. EastLakeshore: 3001 Lakeshore Blvd. WestRyerson Campus: Room POD 158, Podium - 350 Victoria St.Scarborough: 200 Town Centre Ct.Shepard: 4900 Yonge St.Streetsville: Campus Plaza, 113 Queen St. SouthYork Campus: York Lanes Mall, 4700 Keele St.

North Bay107 Shirreff Ave.

KingstonCANEX Mall: CFB Kingston

PembrokeRosewood Plaza, 680 Pembroke St. East

GatineauGatineau Sector: 160 Boulevard de l’HôpitalHull Sector: Place du Portage – Phase IV