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Annual Report

Annual Report

Financial Highlights 2007 

Strategic Orientations and Mission 

Message from the Chairman 

Message from the President and General Manager 

Questions and Answers 

Impact on the Québec Economy 

Review of Activities 

Financial Review 

Board of Directors and Corporate Governance 

Officers and Management Committee 

Previous Reports 


In 2007, SGF teamed up with its employees, partner entrepreneurs and investors in order to measure up in a complex business environment presenting many pitfalls.

A difficult environment
The economic winds blew with gale force during the year. In 12 months, the Canadian dollar rose almost 20% to reach parity with the U.S. currency, something not seen for more than 30 years. The price of crude oil also surged; the price of a barrel ranged from US$55 to $60 at the start of 2007 but ended the year at $90 and it has since stayed well above US$100 a barrel. The U.S. economy stumbled to the point where the word recession was applied to our leading export market. International competition became even more intense, from domestic and external standpoints alike. During the year, China surpassed Canada as the leading exporter of goods to the United States. And, in the second half, an unprecedented credit crisis hit the global economy and the financial sector.

Québec’s economy was partially protected from these disruptions by substantial public investment, mainly in infrastructure and development of renewable energy. Even so, our exporters lost the competitive advantage of a weak currency and were hard hit by the U.S. economic slowdown.

Satisfactory results

Despite this decidedly volatile context, our results are very satisfactory. SGF invested $233 million in companies active in Québec and generated a 3% return.


This performance means that, for the fifth straight year, SGF was self-financing and, for the third straight year, it turned a profit.

SGF is most definitely creating wealth for Québec. Our results have to be assessed in light of not only the economic context but also our specific mandate. SGF is unique on Québec’s financial landscape: it is the only player whose every investment must meet the double criteria of being made in Québec and contributing to its economic development. We don't have the option of taking shelter from the wind. We are involved in the sectors that are most affected by changing business fundamentals, since 80% of our portfolio consists of investments in manufacturing, forestry and petrochemicals.
Teaming up with our partners
We are involved in these sectors and we intend to pursue this involvement. We have the expertise to help renew Québec’s competitive edge in these traditional industries and we have the resources to foster their consolidation. Moreover, our investments show there will always be sound business opportunities in these areas.
During the year, we invested in Induspac, which represents a new generation of forestry companies. We also invested in Boucherie Jean-Guy Soucy, a rising agri-food business. And we worked with partners experiencing difficulty, assisting the petrochemical company Interquisa Canada in its efforts to return to profitability.


What the 2007 results show is the considerable expertise of SGF’s employees, of course, but also the talent of our partners, who are driven by a strong desire to succeed. We are proud to work
with them.

During this volatile year, many companies in our portfolio, such as and Cascades, invested in new markets to secure their growth. We took part in developing their expansion plans.

While continuing to be involved in the forestry, agri-food and petrochemical sectors, SGF began to increase its influence in information and communication technologies and in life sciences, where Québec holds an advantageous position in North America and globally. 

Promising business opportunities
During the year, SGF also acted on promising business opportunities in rapidly growing sectors. For the second consecutive year, we invested in the film industry, concluding one partnership with Lionsgate and another with , which as a result agreed to move its head office to Montréal. SGF’s involvement in the film industry represents 8,250 jobs and enhances Québec’s stature in a sector where its reputation for originality and creativity are keys to success.

SGF also became a 25% partner in Groupe Le Massif, the developer of Québec’s largest recreational tourism project, which is emblematic of the sustainable development that will take shape in the mountains overlooking Petite-Rivière-Saint-François.

SGF therefore had a very busy year, during which it achieved most of its objectives. Our profitability was affected by the commercial paper crisis, however. For SGF, these holdings were not an investment but rather a means of managing cash over the short term. On December 31, 2007, SGF held $132 million of these notes and recorded a write-down of $19.9 million or 15% of their value.

Outlook for 2008
In 2008, SGF will again face many challenges in a context that will not be much easier than that of 2007. Once more, we shall aim to invest $250 million in Québec’s economic development, which will require considerable effort, since that amount corresponds to more than 12% of shareholder’s equity, and to achieve profitability for the fourth straight year. We are maintaining the strategic orientations that have enabled us to reach profitability, and we support the government’s initiative to create a new economic space for Québec by opening up markets in Europe and Canada so as to cope more effectively with international competition and the parity of the Canadian and U.S. currencies.

I wish to thank the members of the Board of Directors for their confidence and wise counsel. I also thank SGF’s employees, who are the heart and soul of our organization. And I thank our partners, whose success is our raison d’être. We’re teaming up to measure up.

Pierre Shedleur, FCA
President and General Manager


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