Disclosure Statement

CLASS “C” VOLUNTARY EQUITY SHARES

June 2014

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East Kootenay Community Credit Union (The "Credit Union")

924 Baker Street Cranbrook, BC

V1C 1A5

Class “C” Voluntary Equity Shares

Class “C” Voluntary Equity Shares are $1 par value Equity Shares of the Credit Union, issuable pursuant to its Rules.

Rights relating to dividends, redemptions and transfers of the Class “C” Voluntary Equity Shares are subject to various preconditions referred to in this Disclosure Statement.

The Class “C” Voluntary Equity Shares are not currently tradable on any stock exchange or similar market and no such market is anticipated.

Fractional share purchases are not permitted under the current legislation.

Dividends declared and paid from Class “C” Voluntary Equity Shares are treated as interest income for income tax purposes. As such, they are not eligible for the dividend tax credit.

Class “C” Voluntary Equity Shares are not guaranteed by the Credit Union Deposit Insurance Corporation of British Columbia.

Neither the Superintendent of Financial Institutions nor any other authority of the Government of the Province of British Columbia has in any way passed on the merits of the matters dealt with in this Disclosure Statement.

The information contained in this Disclosure Statement has been reviewed and is hereby certified by the Board of Directors of East Kootenay Community Credit Union to constitute full, true and plain disclosure of all material facts relating to the shares offered by this Disclosure Statement as required by the Credit Union Incorporation Act (British Columbia) and its Regulations and the Rules of East Kootenay Community Credit Union (EKC). Certified this May 22nd, 2014 on behalf of the Board of Directors Signed "Jody E. Burk" Signed "Don Holt"

Jody E. Burk Don Holt Chief Executive Officer Board Chair

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Table of Contents

DEFINITIONS .................................................................................................................................................. 4 DESCRIPTION OF CLASS “C” VOLUNTARY EQUITY SHARES ........................................................................... 5

A. Par Value .............................................................................................................................................. 5 B. Voting Rights ......................................................................................................................................... 5 C. Dividend Rights ..................................................................................................................................... 5 D. Redemption Provisions ........................................................................................................................ 6 E. Liquidation and Distribution Rights ...................................................................................................... 6 F. Conversion ............................................................................................................................................ 6 G. Class “C” Voluntary Equity Shares and Withdrawal Rights ................................................................. 6 H. Sinking Fund Provisions ........................................................................................................................ 7 I. Modifications, Amendments or Variation of Rights or Provisions ........................................................ 7

PLAN OF DISTRIBUTION ................................................................................................................................ 7 USE OF PROCEEDS ......................................................................................................................................... 8 TAX CONSEQUENCES .................................................................................................................................... 8 MARKET FOR SHARES .................................................................................................................................... 8 CAPITAL STRUCTURE ..................................................................................................................................... 9

Class “A” Membership Equity Shares ....................................................................................................... 9 Class “B” Transaction Equity Shares ......................................................................................................... 9 Class “C” Voluntary Equity Shares ............................................................................................................ 9

REGISTRAR AND TRANSFER AGENT ............................................................................................................ 10 OPTIONS TO PURCHASE SHARES ................................................................................................................ 10 SUBSIDIARIES OF CREDIT UNION ................................................................................................................ 10 DESCRIPTION OF BUSINESS ......................................................................................................................... 10 DEVELOPMENTS .......................................................................................................................................... 11 FIVE·YEAR FINANCIAL SUMMARY ............................................................................................................... 13 CONSOLIDATED BALANCE SHEETS .............................................................................................................. 13 VARIATIONS IN OPERATING RESULTS ......................................................................................................... 14 KEY RATIOS .................................................................................................................................................. 16 DIVIDEND RECORD ...................................................................................................................................... 17 RISK FACTORS .............................................................................................................................................. 18

A. General Risks ...................................................................................................................................... 18 B. Business Risks ..................................................................................................................................... 18

1. Credit Risks ..................................................................................................................................... 18 2. Investment Risks............................................................................................................................. 19 3. Liquidity Risks ................................................................................................................................. 19 4. Interest Rate Risks .......................................................................................................................... 19 5. Currency Risks ................................................................................................................................ 20

EAST KOOTENAY COMMUNITY CREDIT UNION BRANCH OFFICES ............................................................. 20 SUBSIDIARY BRANCH OFFICES .................................................................................................................... 20 DIRECTORS AND SENIOR OFFICERS ............................................................................................................. 21

Directors ................................................................................................................................................. 21 Senior Officers ........................................................................................................................................ 21

COMMITTEES OF THE BOARD OF DIRECTORS ............................................................................................ 21 AUDITOR AND FINANCIAL STATEMENTS .................................................................................................... 21 Asset/Liability Management Consultant ..................................................................................................... 21 OTHER MATERIAL FACTS ............................................................................................................................. 22 FURTHER INFORMATION ............................................................................................................................ 22

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Definitions

"the Board" Directors of East Kootenay Community Credit Union. "Class “C” Voluntary Equity Shares" Classes of Equity Shares set out in Credit Union rule 2.3. "the Act" The Credit Union Incorporation Act. "Credit Union" East Kootenay Community Credit Union (EKC). "Equity Shares" All classes of shares of the Credit Union which entitle the

holders to a share of the residual property and assets of the Credit Union in the event of dissolution, wind-up or other distribution of assets.

"cumulative dividends" Dividends not declared for one fiscal year are carried

forward or added to the dividend of a following year. "policy" A policy of the Credit Union as established by the Board.

Policies are reviewed regularly and may be rescinded or changed at any time, subject to the Rules.

"member" One individual who owns Membership Shares. "the Regulations" or "Regulations" The Regulations of the Credit Union Incorporation Act. "redemption" The exchange of Class “C” Voluntary Equity Shares for cash

from the Credit Union. See Description of Class “C” Voluntary Equity Shares.

"redemption date" The date that holders of Class “C” Voluntary Equity Shares

may redeem their shares. See Description of Class “C” Voluntary Equity Shares.

"rules" Comprises the constitution and rules created by the Board

and approved by the members to govern the affairs of the Credit Union, subject to the Act and the Regulations.

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Description of Class “C” Voluntary Equity Shares

The Board has authorized the Credit Union to raise additional equity capital through the issue of Class “C” Voluntary Equity Shares at a price of $1 per share. The offer is being made only to members of the Credit Union in good standing.

The minimum purchase amount of each series of Class “C” Voluntary Equity Shares is 1,000 shares per member. The maximum amount of each series of the Class “C” Voluntary Equity Shares that may be purchased is 25,000 shares per member.

Class “C” Voluntary Equity Shares may be purchased over a number of issue dates. A share certificate will be issued. The Credit Union shall maintain a register of investors in Class “C” Voluntary Equity Shares and, in the absence of any evidence to the contrary, this register will constitute proof of legal ownership of the shares. Eligible purchasers must be members in good standing of the Credit Union, a person acting on behalf of a member as set out in the Regulations, or any other persons allowed under the Regulations.

Class “C” Voluntary Equity Shares may be purchased only outside of a Registered Retirement Savings Plan.

A. Par Value

Class “C” Voluntary Equity Shares shall have a par value of $1.

B. Voting Rights

The Rules provide that only Members that hold Class "A" Membership Equity Shares of East Kootenay Community Credit Union shall carry the right to vote at a general meeting. Under the Acts, holders of each class of Equity Shares other than Membership Equity Shares are entitled to vote at a meeting on separate resolutions involving the creation or variation of the special rights and restrictions attached to such class of shares, as well as on a substantial asset sale or on an amalgamation.

C. Dividend Rights

Class “C” Voluntary Equity Shares are not entitled to cumulative annual dividends. Rates are to be declared at the discretion of the Board.

The payment of dividends for all classes of equity shares is subject to Section 65 of the Credit Union Incorporation Act, as it pertains to Credit Unions. A credit union must not declare or pay dividends on any class of equity shares if the payment of the dividend would reduce the credit union's capital base to an amount less than the amount that constitutes an adequate capital base for that credit union in accordance with the regulations under section 289(3)(f) of the Financial Institutions Act.

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There is no guarantee of a dividend being declared. Declaration of dividends will depend on many factors, including the financial performance of the Credit Union. The Board has the discretion to retain earnings for operational purposes ahead of Class “C” Voluntary Equity Share dividends. Dividend rights are non cumulative i.e. do not continue to accumulate until paid. Notification of dividends declared will always be provided to members.

D. Redemption Provisions

Class “C” Voluntary Equity Shares are "redeemed" when the Credit Union buys them back from the member and the member sells them back to the Credit Union. The redemption of Class “C” Voluntary Equity Shares is subject to a number of preconditions. Class “C” Voluntary Equity Shares cannot be redeemed if the Credit Union is insolvent, or in certain cases, if its obligations as to certain capital adequacy requirements set out in the Regulations are not met or if the redemption would cause either of those circumstances. Subject to the Credit Union Incorporation Act, the amount of Class “C” Voluntary Equity Shares that may be tendered for redemption or that the Credit Union may call for redemption in any financial year is limited to 20% of the total amount of shares issued and outstanding on the last day of the immediately preceding financial year. In such circumstances, Class “C” Voluntary Equity Shares will be redeemed at par value of $1 per share plus any declared but unpaid dividends. Redemptions of Class “C” Voluntary Equity Shares are not expected to be permitted in any other circumstances. If, in any circumstances, Class “C” Voluntary Equity Shares are redeemed prior to a dividend declaration date, the Class “C” Voluntary Equity Shares redeemed will not be eligible for any dividend paid later that year. If the Class “C” Voluntary Equity Shares are redeemed after a dividend declaration date, dividends declared but not paid will be paid on the redemption date.

E. Liquidation and Distribution Rights

In the event of the liquidation, dissolution or winding-up of the Credit Union, voluntary or involuntary, or any other distribution of assets of the Credit Union among the holders of its shares for the purpose of winding-up its affairs, the holders of Class “C” Voluntary Equity Shares shall rank and participate equally the par value of their shares plus any declared but unpaid dividends thereon.

F. Conversion

Class “C” Voluntary Equity Shares may not be converted or exchanged into any other class or series of shares, except by approval of the Board.

G. Rescission and Withdrawal Rights

A member has the right to cancel any agreement to subscribe for Class “C” Voluntary Equity Shares by making sure that the Credit Union receives a signed request to cancel the subscription before the close of business on the fifth business day after the date when your signed subscription form is received by the Credit Union.

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Once Class “C” Voluntary Equity Shares are purchased and cash is received they become part of the capital structure of the Credit Union. Therefore, there are no rights for rescission or withdrawal after purchase. Any request for redemption must be dealt with by the Board according to the Redemption Provisions set out in this Disclosure Statement and pursuant to the Credit Union Incorporation Act (Section 64).

H. Sinking Fund Provisions

There is no intention or provision to create a sinking fund in respect of any Class “C” Voluntary Equity Shares issued.

I. Modifications, Amendments or Variation of Rights or Provisions

The rights and conditions attaching to Class “C” Voluntary Equity Shares are set out in the Rules as noted above. Subject to the Act, the Rules may be amended from time to time by special resolution of the members of the Credit Union and by separate resolution by holders of Class "A" Membership Equity Shares, as may be necessary.

Plan of Distribution

Price Discounts or Proceeds to Commissions Credit Union

Per share $1 None $1 Total $2,000,000 None $2,000,000 The Class “C” Voluntary Equity Shares will be offered only to members in good standing of the Credit Union who are over the age of 19 at the subscription date. Solicitations of interest and subscriptions for purchase from members may be obtained by Credit Union staff through contact at branches, through writing, telephone and/or electronic communication, or other advertising. The minimum subscription per member is 1,000 of each series of Class “C” Voluntary Equity Shares and the maximum is 25,000 of each series of Class “C” Voluntary Equity Shares. There is no fractional purchasing of shares. Class “C” Voluntary Equity Shares will be sold by the Credit Union to qualifying members. Prospective investors must complete and sign a subscription form and return it to any branch or to the Corporate Office of the Credit Union and must receive a copy of the Disclosure Statement, the latest audited annual consolidated financial statements, and acknowledge receipt of and knowledge of the contents of this information. Share purchase transactions will not be completed unless fully paid for. Eligibility for dividends will commence July 1st, 2014. See Description of Class “C” Voluntary Equity Shares for more information on dividend rights.

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Use of Proceeds

The proceeds from the issue of the Class “C” Voluntary Equity Shares will increase the capital structure of the Credit Union for use in general, investment and lending activities. There are no discounts or commissions to be paid to any agents, underwriters or salespersons relating to the issue of these Class “C” Voluntary Equity Shares.

Tax Consequences

This summary is of a general nature only and is not intended to be, nor should be understood as, legal or tax advice to any particular person. Therefore, prospective investors should inform themselves of, and if appropriate, consult their own tax or other professional advisors on the possible tax consequences of any share transaction they might enter into, based on their own particular circumstances.

The following commentary summarizes the principal Canadian federal income tax consequences to individuals who are resident in Canada for income tax purposes, who acquire shares pursuant to this Disclosure Statement and who hold the interest as capital property.

Investors who acquire Class “C” Voluntary Equity Shares will be required to include dividends in their taxable income at the time they are paid. This income will be considered to be received as interest and not as dividend income.

Investors whose shares are redeemed by the Credit Union should not incur any capital gain or loss on the redemption transaction since both the original purchase price and the redemption price will be $1 per share.

The disposition of a share in any other circumstances may give rise to a capital gain (or capital loss) to the extent that the proceeds received on the disposition exceed (or are exceeded by) the sum of the adjusted cost base of the share for income tax purposes and any costs of its disposition.

Generally, any interest expense incurred on money borrowed to acquire shares to be held outside an RRSP is deductible for income tax purposes. However, this is subject to the overriding condition that the interest expense be reasonable in the circumstances. Canada Customs and Revenue Agency may disallow as a deduction that portion of the shareholder's borrowing costs in excess of the expected dividends.

EKC Class “C” Voluntary Equity Shares are not eligible as an investment within an RRSP, TFSA, RESP or any other type of registered investment.

Market for Shares

There is no bona fide market through which the Class “C” Voluntary Equity Shares may be sold or traded. The Class “C” Voluntary Equity Shares are not listed on any stock exchange. Furthermore, the shares are not transferable, unless permitted by a resolution of the Board. Upon purchase of the Class “C” Voluntary Equity Shares, the member will be required to hold the shares until the shares are redeemed pursuant to the Redemption Provisions set out in this Disclosure Statement. See Description of Class “C” Voluntary Equity Shares, Redemption Provisions.

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Capital Structure

The Credit Union is permitted to issue and/or has issued and/or is about to issue the following "classes" of shares:

Class “A” Membership Equity Shares Each member must hold Class “A” Membership Equity Shares. Class “A” Membership Equity Shares are issued at $1.00 par value to a maximum as prescribed in the Credit Union Incorporation Act, Section 44(7). Class “A” Membership Equity Shares carry the right to vote at a general meeting of members and are redeemable at par at the member's request upon cessation of membership. As at December 31, 2013 there were 1,184,750 Class “A” Membership Equity Shares outstanding having an aggregate par value of $1,184,750. Each member, including junior members (under the age of 19) is required to hold at least 5 shares (at a $1.00 par value). In respect to a membership, each member must own and hold 5 shares of Class “A” Membership Equity Shares to qualify as members.

Class “B” Transaction Equity Shares Each member must hold Class “A” Membership Equity Shares prior to purchasing any amount of Class “B” Transaction Equity Shares. Class “B” Transaction Equity Shares are issued at $1.00 par value to a maximum as prescribed in the EKC rules. Notwithstanding the foregoing, but subject to the Credit Union Incorporation Act, the amount of Class “B” Transaction Equity Shares that the credit union may be required to redeem in an financial year is limited to 20% of the total amount of such shares issued and outstanding on the last day of the immediately preceding financial year. Any entitlement to dividends with respect to these shares is at the discretion of the Board. Class “B” Transaction Equity Shares are redeemable at par, plus any dividends declared but unpaid thereon. As at December 31, 2013 there were 0 Class “B” Transaction Equity Shares outstanding. Dividends are non-cumulative and redemptions have no precedence over other classes of equity shares.

Class “C” Voluntary Equity Shares Class “C” Voluntary Equity Shares were introduced to provide an opportunity for members to invest in the capital structure of the Credit Union. Class “C” Voluntary Equity Shares are issued at a par value of $1.00 with a minimum of 1,000 shares to a maximum subscription of 25,000 shares.

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Any entitlement to dividends with respect to these shares is at the discretion of the Board. Class “C” Voluntary Equity Shares are redeemable at par, plus any dividends declared but unpaid thereon. Dividends are non-cumulative and redemptions have no precedence over other classes of equity shares. As at December 31, 2013 there were 439,132 Class “C” Voluntary Equity Shares outstanding having an aggregate par value of $439,132. The rights and restrictions attaching to all classes of Credit Union shares are set out in the Act and its Regulations and the Credit Union's Rules. Copies of the Act, Regulations and Rules are available on request at the Credit Union's Head Office.

Registrar and Transfer Agent

The Credit Union will act as Registrar and, to the extent necessary, as Transfer Agent for all Equity Shares. The register of Equity Shares will be maintained at the Corporate Office of the Credit Union and branch registers may be retained at each branch of the Credit Union. Equity Shares may be transferred or redeemed at any branch of the Credit Union upon receipt of the required approval.

Options to Purchase Shares

There are no options outstanding for the purchase of any Credit Union shares.

Subsidiaries of Credit Union

The Credit Union has the following wholly-owned subsidiaries:

East Kootenay Community Financial Services Ltd.

East Kootenay Community Insurance Services Ltd. There are no securities outstanding which are convertible into any class of shares in the Credit Union.

Description of Business

The Credit Union is a co-operative financial services institution incorporated under the laws of British Columbia and regulated under the Financial Institutions Act of British Columbia. The Credit Union's primary business activity is providing financial services to its members and the general public primarily in the East Kootenay which is located in the south east corner of British Columbia. East Kootenay Community Credit Union, formerly known as Cranbrook Savings Credit Union, received official certification being incorporated under the Credit Unions Act with its certification dated December 14, 1950. The Credit Union has its corporate offices and main branch in Cranbrook, with 3 other branches in the Elk Valley located in Elkford, Fernie and

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Sparwood. By its business authorization certificate, the Credit Union is authorized to carry on deposit business within the Province of British Columbia. In addition to traditional banking services, full financial and wealth management services are offered at the all EKC branches. Insurance products and services are also provided through EKC. Kootenay Insurance Services Ltd. East Kootenay Community Insurance Services Ltd., which is a wholly-owned subsidiary of East Kootenay Community Credit Union, holds one-third of the non-voting, participating shares of Kootenay Insurance Services Ltd. The wealth management products and services are offered through East Kootenay Community Financial Services Ltd. which is another wholly owned subsidiary of East Kootenay Community Credit Union. East Kootenay Community Financials Services Ltd. holds one-third of the non-voting shares, participating shares of 0948859 B.C. Ltd. (o/a Money Works). These insurance and financial planning services companies provide diversification for East Kootenay Community Credit Union while generating alternate revenue streams and providing EKC’s members with coordinating products and services. The Credit Union's plans for the future are to continue to focus and build on the needs of its members and the communities EKC serves. The opening of a new branch in Sparwood in March 2012 was an example of reaching out to its members within the communities they work and reside to make the financial services as accessible as possible for its members. The Credit Union has a policy to develop and maintain a sound capital base made up of Retained Earnings and Equity Shares for the benefit of the Credit Union and its members and intends to continue to strengthen its capital base. The Credit Union is required to maintain a capital base of more than 8.00% of risk weighted assets. The capital base, as calculated to determine the capital adequacy ratio, is based on prescribed regulations. As of December 31st, 2013, the Credit Union had a capital adequacy ratio of 14.02% and a ratio of 13.82% as of March 31st, 2014. The Capital Requirements Regulation of the Financial Institutions Act also requires that at least 35% of the capital base of the Credit Union must consist of retained earnings. As of December 31, 2013, 86.3% of the Credit Union's capital base consisted of retained earnings.

Developments

During the past five years, neither the Credit Union nor any of its subsidiaries have been subject to regulatory action, receivership, insolvency or similar action or material reorganization. Other than the items noted below, during the last five years, neither the Credit Union nor any of its subsidiaries has acquired or disposed of any material amounts of assets other than in the ordinary course of business, nor have there been any changes in the type of products sold or services rendered or the mode of conducting business. In the January 2013, in order to provide a better range of wealth management services and products to its members, Money Works was created. East Kootenay Community Financial Services Ltd., which is a wholly owned subsidiary of East Kootenay Community Credit Union,

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holds one-third of the non-voting participating shares of 0948859 B.C Ltd. operating as Money Works. In an effort to reach out to be closer it its Elk Valley members, East Kootenay Community Credit Union, open its 4th branch in Sparwood, B.C. in March 2012. This branch is the 3rd branch in the Elk Valley. East Kootenay Community Insurance Services Ltd. (EKCIS) was in the business of selling insurance products until January 31st, 2007. EKCIS, a wholly owned subsidiary of East Kootenay Community Credit Union, holds one-third of the non-voting participating shares of Kootenay Insurance Services Ltd., was created to provide a better range of insurance products and services to its members.

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Five Year Financial Summary

Consolidated Balance Sheets

The development of East Kootenay Community Credit Union over the past 5 years can be seen from the following comparative figures:

2009 2010 2011 2012 2013

ASSETS

CASH AND TERM DEPOSITS

$22,259,235

$26,977,004

$29,111,702 $21,805,461

$27,963,363

INVESTMENTS

1,334,445

1,359,183

4,298,074

4,091,201

4,802,839

MEMBER LOANS

174,250,709

176,760,783

185,703,963

209,177,476

234,802,479

PROPERTY HELD FOR RESALE

112,307

117,958

-

263,880

10,000

PROPERTY, PLANT AND EQUIPMENT

4,056,578

4,590,840

5,673,276

5,999,431

5,820,977

INANGIBLE ASSETS

-

-

416,175

339,313

260,550

OTHER ASSETS

349,905

351,780

386,294

582,113

478,885

$202,363,179

$210,157,548

$225,589,484 $242,258,875 $274,139,093

LIABILITIES AND MEMBERS' EQUITY ACCOUNTS PAYABLE AND ACCRUED

LIABILITIES

$ 1,245,879

$ 1,800,262

$ 1,890,001

$ 1,701,786

$ 1,909,418

MEMBERS' DEPOSITS

187,651,819

194,431,314

205,841,404

218,877,956

237,209,473

MEMBERS' SHARES

1,344,321

1,194,412

1,235,058

1,261,254

1,488,120

DEFERRED INCOME TAXES

-

-

592,355

571,755

534,103

LOANS PAYABLE

600,016

-

-

3,501,631

15,436,419

DEFERRED INCOME

-

-

- -

179,343

$190,842,035

$197,425,988

$209,558,818

$$225,914,382 $256,756,876

MEMBERS' EQUITY

Share Capital

$1,537,969

$1,532,548

$1,607,936 $1,689,848

$1,623,652

Accumulated Comprehensive Income

-

-

-

239,221

241,289

Retained Earnings

9,983,175

11,199,012

14,422,730

14,415,424

15,517,276

$11,521,144

$12,731,560

$16,030,666 $16,344,493

$17,382,217

$202,363,179

$210,157,548

$225,589,484

$242,258,875

$274,139,093

Throughout the years East Kootenay Community Credit Union has continued to grow and prosper providing its members with a sound investment in the community. As of April 30, 2014, East Kootenay Community Credit Union’s Membership base has grown to over 11,000 Members with Total Consolidated Assets of $285,954,629.

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Variations in Operating Results

The income of East Kootenay Community Credit Union over the last 5 years is as follows:

2009 2010 2011 2012 2013

INTEREST INCOME

Interest from Loans

$9,342,244

$9,171,969

$9,259,528

$9,315,279

$9,869,229

Interest from Investments

809,711

704,203

705,914

653,246

549,899

10,151,955

9,876,172

9,965,442

9,968,525

10,419,128

INTEREST EXPENSES

Interest on Deposits

3,675,455

2,953,832

3,359,734

3,240,679

3,175,931

Interest on Borrowed Funds

5,668

7,178

4,300

19,965

174,381

3,681,123

2,961,010

3,364,034

3,260,644

3,350,312

NET INTEREST INCOME BEFORE IMPAIRMENT CHARGES

6,470,832

6,915,162

6,601,408

6,707,881

7,068,816

Impairment Charges on Member Loans

-

-

-

(311,365)

(215,873)

NET INTEREST INCOME AFTER IMPAIRMENT CHARGES

6,470,832

6,915,162

6,601,408

6,396,516

6,852,943

NON-INTEREST INCOME (EXPENSES)

Service Fees and Commissions

1,895,973

2,065,595

1,945,344

1,080,921

706,268

Gain (Loss) on Disposal of Assets

(53,517)

33,483

(113,753)

(2,057)

488,828

Loans Services

-

-

-

484,032

262,498

Processing Handling Fees

(193,834)

(181,294)

(199,131)

-

-

Foreign Exchange

-

-

-

164,341

113,360

Rental Income

-

-

-

74,444

138,814

Other

-

-

-

332,107

362,749

Consolidated Non-Financial Expenses

(6,536,602)

(7,189,902)

(7,167,918)

(7,707,886)

(7,595,563)

(4,887,980)

(5,272,118)

(5,535,458)

(5,574,098)

(5,523,046)

INCOME BEFORE INCOME TAXES, DONATIONS AND

REWARDS TO MEMBERS

1,582,852

1,643,044

1,065,950

822,418

1,329,897

DONATIONS AND REWARDS TO MEMBERS

Community Donations

-

-

-

125,579

59,764

Rewards to Members

283,522

225,797

190,275

118,640

124,374

283,522

225,797

190,275

244,219

184,138

INCOME BEFORE INCOME TAXES

1,299,330

1,417,247

875,675

578,199

1,145,759

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INCOME TAXES

Current Income Taxes

118,746

182,894

107,368

67,743

79,491

British Columbia Corporation Capital Tax

45,100

9,778

-

-

-

Deferred Income Taxes

2,734

8,738

91,210

19,036

(35,584)

166,580

201,410

198,578

86,779

43,907

NET INCOME

1,132,750

1,215,837

677,097

491,420

1,101,852

RETAINED EARNINGS - BEGINNING OF YEAR

8,850,425

12,529,796

13,745,633

13,924,004

14,415,424

RETAINED EARNGINS - END OF YEAR

$ 9,983,175

$ 13,745,633

$ 14,422,730

$ 14,415,424

$ 15,517,276

The format for the Income Statement changed in 2013 (with prior’s year also) in order to provide more details and align more with Financial Institution Commission’s Comparative Analytical Report format. The record of earnings over the preceding five (5) year period is a result of a good balance between growth and expense control, along with assets of the highest quality. These factors along with low interest rates and the ever-present competition from not only local bank and Kootenay credit unions, but also from out of virtual financial institutions, have contributed to our financial margin.

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Key Rations

2009 2010 2011 2012 2013

Annual Growth Member Loans

2.30% 1.44% 5.06% 12.64% 12.25%

Member Deposits

1.20% 3.61% 5.87% 6.33% 8.38%

Total Assets

1.86% 3.85% 7.34% 7.39% 13.16%

Operating Ratios - % of Average Assets Financial Margin

3.15% 3.33% 3.01% 2.82% 2.70%

Operating Margin

3.98% 4.22% 3.65% 3.41% 3.18%

Operating Expenses

3.23% 3.44% 3.21% 3.16% 2.95%

Net Earnings for the year

0.56% 0.59% 0.53% 0.31% 0.25%

Capital Breakdown - % of Total Capital Equity Shares

12.60% 11.32% 9.63% 9.77% 9.09%

Retaining Earnings

81.10% 82.08% 82.82% 85.55% 86.32%

Deferred Tax

0.00% 0.00% 1.68% 1.66% 0.84%

Total Primary Capital

93.70% 93.40% 94.13% 96.98% 96.25%

System Capital

10.56% 9.92% 8.32% 9.09% 10.22%

Total Capital

104.26% 103.32% 102.45% 106.07% 106.47%

Deductions from Capital

4.26% 3.32% 2.45% 6.07% 6.47%

Capital Base

100.00% 100.00% 100.00% 100.00% 100.00%

Capital Adequacy Ratio

Retained Earnings % of Total Assets

4.94% 5.33% 6.19% 6.15% 5.68%

Liquidity (Note 2)

11.63% 13.78% 14.05% 9.90% 11.71%

Notes: 1. 35% of regulatory capital must be composed of retained earnings. 2. Statutory requirements for liquidity are 8%.

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Dividend Record

East Kootenay Community Credit Union has declared and paid the following annual dividends since January 1, 2003

Class "A" Class "B" Class "C" Class "D"

Membership Equity Shares

Transaction Equity Shares

Voluntary Equity Shares

Non-Equity Shares

Annual Rate Annual Rate Annual Rate Annual Rate

2014 2nd Quarter

3.0% - 5.0% 1.0%

1st Quarter

3.0% - 5.0% 1.0%

2013 4th Quarter

3.0% - 5.0% 1.0%

3rd Quarter

3.0% - 5.0% 1.0%

2nd Quarter

3.0% - 5.0% 1.0%

1st Quarter

3.0% - 5.0% 1.0%

2012 4th Quarter

3.0% - 5.0% 1.0%

3rd Quarter

3.0% - 5.0% 1.0%

2nd Quarter

3.0% - 5.0% 1.0%

1st Quarter

3.0% - 5.0% 1.0%

2011 4th Quarter

3.0% - 5.0% 1.0%

3rd Quarter

3.0% - 5.0% 1.0%

2nd Quarter

3.0% - 5.0% 1.0%

1st Quarter

3.0% - 5.0% 1.0%

2010 4th Quarter

3.0% - 5.0% 1.0%

3rd Quarter

3.0% - 5.0% 1.0%

2nd Quarter

3.0% - 5.0% 1.0%

1st Quarter

3.0% - 5.0% 1.0%

2009 4th Quarter

3.0% - 5.0% 1.0%

3rd Quarter

3.0% - 5.0% 1.0%

2nd Quarter

2.0% - 3.0% 1.0%

1st Quarter

1.0% - 1.5% 0.5%

2008 4th Quarter

3.0% - 3.0% 0.5%

3rd Quarter

4.5% - 3.5% 1.5%

2nd Quarter

6.0% - 5.0% 2.0%

1st Quarter

6.0% - 5.0% 2.0%

2007 4th Quarter

6.0% - - 4.0%

3rd Quarter

6.0% - - 4.0%

2nd Quarter

7.0% - - 4.0%

1st Quarter

6.0% - - 4.0%

2006 4th Quarter

6.0% - - 4.0%

3rd Quarter

6.0% - - 4.0%

2nd Quarter

6.0% - - 4.0%

1st Quarter

6.0% - - 4.0%

2005 4th Quarter

5.0% - - 3.0%

3rd Quarter

4.0% - - 3.0%

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2nd Quarter

4.0% - - 2.0%

1st Quarter

4.0% - - 3.0%

2004 4th Quarter

4.0% - - 2.0%

3rd Quarter

4.0% - - 2.0%

2nd Quarter

3.0% - - 2.0%

1st Quarter

3.0% - - 2.0%

2003 4th Quarter

4.0% - - 3.0%

3rd Quarter

4.0% - - 3.0%

2nd Quarter

5.0% - - 3.0%

1st Quarter

5.0% - - 3.0%

The Credit Union has a steady record of paying dividends on all of its equity and non-equity shares. There have been no circumstances when any required or proposed dividend has not been paid in full when required or intended, nor any debt, obligation or commitment not settled in accordance with its terms.

Risk Factors

A. General Risks

Class “C” Voluntary Equity Shares represent equity capital of the Credit Union and, as such, are subordinate to certain other claims against the property and assets of the Credit Union. Neither the principal nor dividends on the shares are guaranteed in whole or in part by the Credit Union Deposit Insurance Corporation of British Columbia. No market exists for the Class “C” Voluntary Equity Shares, nor are they transferable unless permitted by a resolution of the Board. As a holder, you will have certain redemption rights (see Redemption Provisions). Dividends on Class “C” Voluntary Equity Shares are non cumulative. If, for any reason, the Board does not declare a dividend in one year, that dividend is not carried forward and added to the dividend in a future year. Dividends that are declared are payable on redemption of the shares. There is a risk that the Credit Union may not declare dividends or be unable to pay declared and unpaid dividends at the time of redemption of the shares.

B. Business Risks

In addition to general competitive and economic risks, the Credit Union has the following specific business risk factors:

1. Credit Risks

One of the Credit Union's most important business activities is the granting of loans and mortgages to its members. With such activity, there exists the possibility of loss from uncollectible loans. As at December 31, 2013, the Credit Union had a total of $223,007,961 outstanding in loans and mortgages to all members. The total portfolio at December 31, 2013 was comprised of 19.3% personal loans, 51.5% residential mortgages, and 29.2% commercial mortgages and loans.

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The Credit Union has developed lending policies which, in addition to experienced lending staff, adequate loan security and the presence of internal controls, contribute to reducing the risks inherent in credit granting. The Credit Union's multi-region branch network also results in the diversification of loans in the portfolio, which contributes to the mitigation of risks.

2. Investment Risks

The Credit Union is also exposed to risk in respect of its investments. In particular, investments in corporate entities may decline in value as a result of poor performance or other factors. As a result, the Credit Union may be unable to realize the full carrying value of each investment, in cash, within the time frame in which it wishes to do so. At December 31, 2013, the Credit Union's investment portfolio, including required liquidity investments, totaled $28,848,522 and was comprised of cash, term deposits, and shares in Central 1 Credit Union and sundry investments.

3. Liquidity Risks

Liquidity risks involve the risk that a financial institution will have difficulty raising funds to meet commitments associated with financial instruments within the time frame in which it wishes to do so. The Credit Union has access to a Basic Credit Facility in the amount of $12,138,677 and a Customized Credit Facility in the amount $8,000,000 for a total of $20,138,677 in committed Term and CAD and USD operating Lines from Central 1 Credit Union. The Credit Union must maintain an amount at least equal to 8% of its assets in prescribed classes of assets pursuant to the Financial Institutions Act. In the event that the Credit Union's liquidity was to fall below the minimum, the Credit Union would need to modify its business activities to preserve cash and, accordingly, it might not be in a position to redeem its shares. As at December 31, 2013, the Credit Union's liquidity position was approximately 11.71%.

4. Interest Rate Risks

Interest rate risks refer to the potential impact of changes in interest rates on a credit union's earnings when the maturity dates of its deposits and liabilities are not matched with the maturity dates of its investments, loans and mortgages. It is the policy of the Credit Union to keep exposure to interest rate fluctuations within limits set by the Board. The policy stipulates that the Credit Union will assess the Interest Rate Risk based on net interest income simulation. The maximum allowable variance of one standard deviation of Net Interest Income has a limit of 10.0%. If the assessment produces a variance outside the 10.0% limit, EKC will take correct action to bring the result back into policy limits. As at December 31, 2013, the change in financial margin when measured using one standard deviation was 0.69% which is well within the Credit Union’s limit set by the Board. The Credit Union may from time to time utilize financial instruments, principally interest-rate swaps, to manage exposure to interest rate fluctuations and to manage the asset/liability mismatch. These financial instruments are subject to normal credit standards, financial controls, and risk management and monitoring procedures.

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In the event that the Credit Union were to become mismatched to an extent which exceeds the limits described above, future profitability could become seriously eroded with a resulting negative impact on the ability of the Credit Union to pay dividends or redeem its shares.

5. Currency Risks

The Credit Union has minor amounts of liquid assets and member deposits denominated in US dollars. Any currency risk that might exist is considered minimal.

East Kootenay Community Credit Union Branch Offices

Corporate Offices Administration Offices 1101 Baker Street 924 Baker Street Cranbrook, B.C. V1C 1A7 Cranbrook, B.C. V1C 1A5 250.426.8223 250.426.6666 Cranbrook Branch Commercial Services 920 Baker Street 924 Baker Street Cranbrook, B.C. V1C 1A5 Cranbrook, B.C. V1C 1A5 250.426.6666 250.426.6666 Elkford Branch Fernie Branch 814 Michel Road 1601 9th Avenue Po Box 189 PO Box 1440 Elkford, B.C. V0B 1H0 Fernie, B.C. V0B 1M0 250.865.4661 250.423.9222 Sparwood Branch 124 Aspen Drive PO Box 1030 Sparwood, B.C. V0B 2G0 250.910.9222

Subsidiary Branch Offices

Kootenay Insurance Services Ltd. – Cranbrook Offices 920 Baker Street Cranbrook, B.C. V1C 1A5 250.426.6657 EKC MoneyWorks 920 Baker Street Cranbrook, B.C. V1C 1A5 250.426.6694

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Directors and Senior Officers

Directors

Don Holt, Board Chair George Freitag, Vice Chair Lynne Shewchuk, Secretary Jean-Ann Debreceni Jose Galdamez Diane Byford Cindy Corrigan Barbara Nunes Mark Spittael

Senior Officers

Jody Burk, Chief Executive Officer Alan Fillis, Chief Financial Officer Gerry Dreger, Senior Manager of Sales and Services Ken Goldsmith, Senior Manager of Commercial Services Diane Baher, Senior Manager of Sustainment and Projects Corinne Neil, Senior Manager of Information Technology Beth Cornelson, Senior Manager of Human Resources

Committees of Board of Directors

Executive Committee Audit Committee Investment and Lending Committee Conduct Review Committee Human Resources Committee Nominating Committee Building Committee Policy Committee Goodwill Committee

Auditor and Financial Statements

Adams Wooley Certified General Accountants 824 1st Street South Cranbrook, B.C. V1C 7H5 250.426.8277

Asset/Liability Management Consultant

Peter Thain & Associates 13049 15th Avenue Surrey, B.C. V4A 1K6 604.541.8172

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The audited financial statements as of December 31, 2013 are available online at WWW.EKCCU.COM or are available upon request at any branch. The Auditors' Report that accompanies the audited financial statements, as prepared by Adam Wooley Certified General Accountants was received at the Annual General Meeting on April 26th, 2014 in Elkford, B.C. The link to the 2013 Annual Report and Audited Financial Statements is as follows: https://www.ekccu.com/Personal/AboutUs/MediaCenter/AnnualGeneralMeeting/ On this page are links to the annual report, which contains the audited financial statements, the AGM details and the audited financial statements.

Other Material Facts

There is no undisclosed material facts relating to the Class “C” Voluntary Equity Shares proposed to be issued. There is no market or intent to issue Class “B” Transaction Equity Shares in the foreseeable future. Note: It is an offence for a credit union to make a statement or to omit a fact in a disclosure statement required to be made under the Credit Union Incorporation Act that, at the time and in the light of the circumstances under which it is made, is a misrepresentation.

Further Information

This Disclosure Statement is only a summary. If you or your professional advisor are interested in further details you should obtain a copy of the Credit Union Incorporation Act, the Financial Institutions Act, and the Regulations under these Acts, the Credit Union's Rules and the Board Of Directors' resolutions authorizing the issue of the Class “C” Voluntary Equity Shares and determining the dividend, redemption, exchange, conversion and other characteristics of the shares. Copies of the Rules and resolutions are available on request from the Credit Union. Note that any reference above to the authorizing resolutions may, in any specific instance, in fact refer to the Credit Union's authorizing Rules. This Disclosure Statement applies only to Class “C” Voluntary Equity Shares of East Kootenay Community Credit Union. The form of the Disclosure Statement is prescribed by the Regulations. The information included in it is certified to be complete and accurate by the Board Of Directors and the Chief Executive Officer of the Credit Union based on the due diligence and reasonable inquiry.