2010 ANNUAL REPORT

A PATH TO PRODUCER PROFITABILITYHolstein Canada, 20 Corporate Place, Brantford, ON N3R 8A6 | Tel: 519-756-8300 | Fax: 519-756-3502 | www.holstein.ca

Blondin Redman Seisme (VG-89)

President’s Message

Board of Directors’ Report

Chief Executive Officer Report

Business Activity

Action Taken from 2010 Resolutions

Financial Report

Provide leadership through genetic improvement programs to enhance profitability for all

dairy producers.

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TABLE OF CONTENTS

Mission Statement

Supreme Champion 2010 Royal Agricultural Winter Fair

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The governance of our Association and our responsibility towards

our members has been emphasized this past year. Our goal now

consists of ensuring improved communication between the national

Association and its respective branches, always striving to be closer

to our customers. The issues discussed at various levels directly affect

our clients and members and the profitability of their operations. In

conclusion, I would like to sincerely thank everyone who has sat on the

Board of Directors for the trust they have bestowed upon me during

my mandate at Holstein Canada. Together, we have accomplished and

initiated change that will have a major impact on our organization’s

future. Also, I wish to thank all the staff at Holstein Canada; it has

been an honour and a sheer pleasure getting to know you. I appreciate

you for your commitment, respect, and love of our Association.

Finally, thank you to the whole Lehoux family; to my wife Claire, my

children Audrey, Mathieu, Valérie, Marie-Ève, Dany and Pier-Olivier for

their support throughout this wonderful adventure you have allowed

me to fulfill. And finally, I thank you dear friends and… good luck with

Holstein Canada Network!

2010 was a significant year for our Association. The undertaking of

Holstein Canada’s (HC) management by Brian Van Doormaal, jointly

with Canadian Dairy Network (CDN), is a hallmark in the first stage

of our vision for the future. That vision includes an organization

supporting all dairy breeds, all genetic improvement partners, and all

Canadian dairy producers, working together to enhance the services

provided today but also looking towards the needs of the future.

Although many details still need to be clarified, the desire to accomplish

this vision of unity, in line with respecting each other, is unanimous.

Holstein Canada and its members are, and remain, the engine and

leaders of the dairy industry here in Canada, as well as around the

world. Our well-respected image is our strength and trademark. In

the past, CDN and HC provided respective services; amalgamating the

two will simply increase the number and value of services offered.

Development opportunities in Canada and abroad are now better than

ever. A recent mission, led jointly with the Canadian Government in

India, confirms the interest and great potential of this country in regards

to our breed and genetic improvement services. Our genomic testing

service, GenoTest, is already recognized in many countries today.

Knowledge and reliability of values associated with the decoding of

DNA will continue to evolve and change the way we use information

to improve the performance of our dairy producers.

PRESIDENT’S MESSAGEGermain LehouxSaint-Elzéar, Qc

“Holstein Canada andCanadian Dairy Network -

supporting all dairy breeds, all genetic improvement

partners, and all Canadian dairy producers.” “Great potential exists for

Holstein Canada Network.”

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Changes throughout 2010 for Holstein Canada’s Board of Directors

started right at the top, with Brian Van Doormaal hired as its new Chief

Executive Officer (CEO). This makes Brian the CEO of both Holstein

Canada and Canadian Dairy Network (CDN).

One of Brian’s mandates is the merger of CDN and Holstein Canada.

Key reasons and goals for this amalgamation include:

The Board of Directors and management of both organizations will

also address these areas individually.

Following meetings with the other dairy breeds, it has been agreed

that Holstein Canada would become the service provider. The Board

of Directors approved the memorandum of understanding that has

been signed by all partners. It is the intent to offer this service by the

end of 2012. This move falls in line with the positive acceptance of

the All-Breeds Classification initiative. This will benefit all Canadian

dairy producers.

The uptake in the use of genomics—especially with the GenoTest

launch and partnering with the Semex Alliance—has been outstanding.

As the number of animals tested increases, so does the reliability of

the information provided by this technology. We recognize this as one

of the tools of the future, needed to increase the profitability of the

industry.

In response to the resolution on Master Breeder points, the Awards

Committee reviewed and has suggested that a section be included

for awarding points due to longevity in addition to production and

classification. Incorporating this component will allow for the breeders

of the Canadian cow to be recognized among the elite in the world for

breeding cattle with a combination of conformation, production, and

longevity. This is now being evaluated by staff, and will be submitted

to the Board of Directors for approval.

Animal identification is a core service of Holstein Canada. This falls

in line with the Canadian Quality Milk (CQM) standards, as well as

traceability, to continue keeping Canada at the forefront of the world

for all markets.

BOARD OF DIRECTORS’ REPORTChairman Paul MacLeodWoodstock, ON

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1. Increasing efficiencies through the reduction of fees and/or increasing value of services to producers.

2. Reducing costs associated with industry structure, administrative expenses, governance, and boards, etc.

3. Creating a structure allowing continued industry streamlining, both physical and services, in the future.

4. Strengthening our dairy industry through creating a body with a perspective in providing services that include animal identification, herdbook registration, genotyping, type classification, genetic evaluation, research co-ordination, and government relations.

5. Proactively positioning the dairy cattle improvement industry and dairy producers while the economic situation is healthy and self-sufficient.

This proposed merger initiated the formation of an amalgamation

team, which consists of three directors from each board. These

members will identify and assess the options in four areas:

1. Governance Structure

2. Legal Status and Corporate Name

3. Organizational Chart

4. Office Location

With the upcoming 2012 World Holstein Conference, Holstein Canada

continues to plan and prepare to host various tours and forums for

Holstein breeders worldwide. This Conference coincides with the

Royal Agricultural Winter Fair, our showcase of the best that Canada

has to display.

The Board of Directors reviews the mandates and makeup of all

committees. The success of our organization depends on having the

right people on committees that best suit their strengths to challenge

us to continue to move forward. We would like to thank those that have

served on the various committees for their time and commitment.

(back row, l-r) Orville Schmidt, AB; John Buckley, ON; John Davidson, NS; Ron Sleeth, ON(middle row, l-r) Richard Bosma, BC; Dale Strudwick, SK; Mario Perreault, Qc; Jean-Albert Fleury, Qc; Elyse Gendron, Qc; Brian Van Doormaal, Chief Executive Officer

(front row, l-r) Paul MacLeod, ON; Germain Lehoux, Qc; Glen McNeil, ON

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2010 National Board of Directors

“Holstein Canada is proudly hosting the World Holstein

Conference in 2012.”

Next year will be a year of continued growth with the goals the Board

of Directors has established. The Board of Directors continues to

direct and protect the interest of our members. I would like to thank

all Board members, especially Germain Lehoux and John Davidson

who are retiring, for their time and commitment to the betterment of

the Holstein breed.

2010 EDUCATION AWARD WINNERS

CANADIAN CHAMPION 2010

• 5-Year-Old for Total Performance• 2 Super 3’s, 4 Superior Lactations• Calved at 2-01, 3-05, 4-06, 5-05• Breeder: William Moreland, Joyceville, ON• Owner: Mark Moreland, Joyceville, ON• Sire: Comestar Stormatic (EX-CAN)

Rustowil Stormy Stavros (EX-90-CAN)

Jonathan Gord AlblasBranchton, ON

Mélanie BoucherAudet, QC

Nicholas BrownLower Cove, NB

Kenton LindenbachBalgonie, SK

Eric MartinRipley, ON

Mélissa PerreaultSaint-Bernard-de-Michaudville, QC

MILK

FAT

PROTEIN

TOTAL

23,750

1,066

686

475 (+215)

576 (+289)

434 (+164)

1,485 (+668)

Production (kg) BCA05-05 305 (Deviation)

(4.5%)

(2.9%)

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CHIEF EXECUTIVE OFFICER REPORTBrian Van Doormaal

For the Holstein Association of Canada and the Canadian dairy industry

2010 has been exemplary in terms of vision, leadership, embracing

opportunity and success. With the goal of finding a new CEO for the

Association, the Board of Directors converted a difficult challenge into

a major opportunity. The new strategic direction included a common

manager for Holstein Canada and Canadian Dairy Network (CDN) with

the vision of amalgamating the two nationally scoped organizations

into a single entity. While many agree this direction is logical and the

right one, it is a huge challenge that can only be achieved with your

support and commitment as members. Seize this opportunity, embrace

this change and shape it in a manner that proactively positions Holstein

Canada and Canadian dairy producers for the future.

Genomics has revolutionised our industry and will continue to do

so. The only question is at what speed? During 2010, your Board of

Directors and management team have wrestled with this ‘force’ to

maximize the opportunities that genomics can bring to the Association,

its members and the Canadian industry, while reinforcing existing core

services. To this end, the launch of 3K genotyping and the GenoTest

Program in September 2010, in collaboration with Semex Alliance

has broadened the opportunity for low-cost genotyping of heifers

and cows to all producers across the country. Thanks to you and your

commitment to our services, 2010 represents an all-time record year

for herdbook registration, type classification and genotyping services,

which translated into a significant financial surplus for the year.

Another area of important opportunity for the industry has been the

discussions among all breed associations to establish a common

provider of services beyond type classification and genomic testing.

The fruitful meetings during 2010 have been nothing short of

remarkable. Within a six month time frame from May to November, all

seven Canadian dairy cattle breed associations reached agreement to

commit resources towards the development of a system for common

herdbook services to be offered by Holstein Canada. The menu of

services that each breed association is expected to be offered, starting

late 2012, includes herdbook registration, parentage verification

using DNA, pedigree services, memberships, invoicing for services,

award calculations, and database support for respective web sites.

A working group led by Linda Markle, which involves staff from each

breed association and CDN, has been established to proceed with

this major industry initiative. Simultaneously, the management team

at Holstein Canada has prioritised the development of the required

database design and computer system to meet the current and future

business needs of the organisation.

High activity levels of existing services, the introduction of new

services and the planning for future business needs all impact your

Association staff. Whether it is the classifiers working at the farm level

or the staff at head office, everyone has had to boost their productivity

to achieve success in 2010. To each and every employee, I wish to

express sincere appreciation for your positive attitude, acceptance

of change and dedication towards quality customer service. Thank

you! Also, I have to recognize your Board of Directors with Germain

Lehoux as President and Paul MacLeod as Vice-President. Not only

have I been truly impressed with your leadership and compassion

for the Association, I have witnessed your dedication towards the

membership and your spirit of respect for each other. You have openly

welcomed me into the Holstein Canada family as your CEO and it has

been a great honour and privilege working for you and with you. I

sincerely look forward to the great things ahead!

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STATEMENT OF OPERATIONS (comparative by province)

ONTARIO

QUEBEC

NEW BRUNSWICK

NOVA SCOTIA

NEWFOUNDLAND

PRINCE EDWARD ISLAND

MANITOBA

SASKATCHEWAN

ALBERTA

BRITISH COLUMBIA

INTERNATIONAL

4,057

5,175

198

219

17

187

285

153

494

416

4

4,127

5,266

202

222

19

196

294

168

516

418

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TOTALMEMBERSHIPS

PUREBREDREGISTRATIONS

*PERCENTAGEREGISTRATIONS

*RECORDEDREGISTRATIONS

TOTALTRANSFERS

2010 2009 2010 2009 2010 2009 2010 2009 2010 2009

77,259

84,248

3,894

4,235

374

3,735

7,293

4,820

17,058

12,880

0

72,764

82,505

3,792

4,012

100

3,787

6,939

4,703

16,464

12,628

1

19,862

16,745

827

689

975

535

2,802

1,716

6,397

4,936

0

10,851

11,851

493

525

64

336

1,456

977

4,309

2,642

0

2,992

1,972

258

75

50

107

908

296

1,151

1,069

0

14,061

8,784

629

437

52

158

2,029

1,268

3,859

3,081

0

11,791

13,746

321

462

332

800

1,191

788

3,189

1,295

434

12,795

14,955

284

486

167

802

936

678

2,388

1,480

849

11,205 11,432 215,796 207,695 55,484 33,504 8,878 34,358 34,349 35,820

BRITISH COLUMBIA

ALBERTA

SASKATCHEWAN

MANITOBA

ONTARIO

QUEBEC

NEW BRUNSWICK

PRINCE EDWARD ISLAND

NOVA SCOTIA

NEWFOUNDLAND

ALL

307

320

85

180

2,619

4,341

131

123

141

5

8,252

CLASSIFICATION ACTIVITY BY PROVINCEROUND 78 - JUN’09 - MAR’10

REGULARHERDS

MID-ROUNDHERDS

HOLSTEINANIMALS

OTHER BREEDANIMALS

REGULARHERDS

MID-ROUNDHERDS

HOLSTEINANIMALS

OTHER BREEDANIMALS

ROUND 79 - FEB’10 - NOV’10

107

148

54

74

1,109

1,308

50

60

78

2

2,990

9,059

10,522

3,289

4,864

52,856

61,062

2,574

2,753

3,204

148

150,331

395

323

54

260

3,594

4,964

285

108

164

0

10,147

301

323

89

188

2,617

4,309

121

116

139

5

8,208

109

153

52

74

1,150

1,342

46

62

80

1

3,069

8,635

9,793

3,305

4,973

50,814

57,429

2,004

2,253

3,005

174

142,385

394

279

54

231

3,251

4,538

266

70

123

1

9,207

SUMMARY OF REGISTRATIONS BY SOURCECLASSIFICATION ACTIVITY

REGULAR

MID-ROUNDS

SPECIALS

HOLSTEINANIMALS

OTHER BREEDANIMALS

TOTALANIMALS

13,658

3,281

6

215,247

14,695

229,942

12,445

4,211

9

226,115

14,053

240,168

13,160

3,924

1

220,606

14,724

235,330

12,318

4,804

10

225,839

14,583

240,422

13,755

4,828

6

239,651

16,250

255,901

2006 2007 2008 2009 2010

In 2010 Holstein Canada achieved new records, for the second year running, in both animal registration and classification. It registered 280,158 Holsteins for a 1.7% increase, while 255,901 dairy cattle were classified, showing a 6.4% growth over 2009.

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*50% registrations are included in Percentage figures for 2010 and included in Recorded figures for 2009.

Hard Copy

ERA

Internet

40%

19%

41%

32%

23%

45%

27%

24%

49%

23%

27%

50%

20%

28%

52%

300,000

250,000

200,000

100,000

100,000

50,000

02006 2007 2008 2009 2010

ACTION TAKEN FROM 2010 RESOLUTIONS1. MID-ROUND CLASSIFICATION FEE

Submitted by: Nova Scotia / Newfoundland Holstein Branch

“Whereas additional Holstein breeders participate in mid-round classifications than when the program was originally announced, thus decreasing costs per Club or Provincial visits; and

Whereas it is important to the entire industry to collect information on young sire daughters relating to classification in a timely fashion; and

Whereas it is important to encourage all herds to classify; and

Whereas it is a greater convenience with respect to time and labor for large herds, in particular, to classify more often;

Therefore be it resolved that the $100.00 fee charged by Holstein Canada for Mid-Round Classifications be eliminated. Further, be it resolved that the Mid-Round Classifications be at the same cost as Regular round Classifications.”

The Board of Directors discussed this request noting that a detailed study comparing the mid-round and regular round services had been conducted in 2006. In principle, customers of one level of service should not subsidize customers of another level of service. A 2010 analysis presented to the Board of Directors showed that 36.3 percent of all herds used the mid-round service in Round 78. This ranged across clubs from 0 percent to over 80 percent. From a cost perspective, it was concluded that an additional mid-round fee was warranted. The Board therefore agreed to maintain its current policy of ‘user-pay’ services.

2. COMPUTER GENERATED REGISTRATION PAPERS

Submitted by: Ontario Holstein Branch

“Whereas it has been mentioned that Holstein Canada may offer the opportunity for Holstein breeders to print their own registration papers; and

Whereas Waterloo Holstein Breeders wish to express their concern of the possibility of fraudulent use;

Therefore be it resolved that Holstein Canada Board of Directors proceed with caution before offering this service to the membership.”

3. PORTRAITS ON HOLSTEIN CANADA WEBSITE

Submitted by: Ontario Holstein Branch

“Whereas pictures are not visible on the animal inquiry portion of the website; and

Whereas this would enhance the value of portraits taken by breeders at the farm level and also would enhance the marketability of Canadian Holsteins by allowing international enthusiasts and potential buyers to view portraits of family members easily and reliably on a trusted website;

4. E-LISTS

Submitted by: Prince Edward Island Holstein Branch “Whereas the Holstein Association of Canada has a well established database of registered animals; and

Whereas Members, Holstein Clubs, Provincial Branches and show committees regularly use this database to create lists and programs for events; and

Whereas this task requires re-entering and reformatting data;

Therefore be it resolved that the Holstein Association of Canada create an application for their website that will allow users to easily create lists that can be formatted for show programs or other uses as required by the industry.”

The above three (3) resolutions relate to Holstein Canada’s computer system and website development therefore they were each taken under advisement by the Board of Directors for future consideration within the priorities of all computer development projects.

5. MAINTAIN AVAILABILITY OF DIRECT GENOMIC VALUE (DGV)

Submitted by: Québec Holstein Branch

“Whereas genomics is currently an important part in the selection of animals; and

Whereas the genomic lifetime profit index (GLPI) is based on 2 sources of information: the lifetime profit index (LPI) and the direct genomic value (DGV); and

Whereas Canadian breeders want to know the origin of the combined GLPI;

Therefore be it resolved that Holstein Canada ask the Canadian Dairy Network (CDN) that direct genomic value of each animal remain available to all breeders.”

It was noted that direct genomic values were currently available, and no intent presently existed to cease their publication by Canadian Dairy Network (CDN).

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Therefore be it resolved that Holstein Canada develop a system on the animal inquiry portion of the website that would allow professional portraits to be displayed along with all other pedigree information.”

7. TRACEABILITY

Submitted by: Ontario Holstein Branch

“Whereas considerable resources are already invested in bovine identification and to ensure consumer confidence in animal products and for producer protection;

Therefore be it resolved that Holstein Canada pressure the powers that be to implement mandatory registration with enhanced tag quality and 100% adaptation of all bovines with full traceability of movement from birth to after death.”

This resolution was taken under advisement by the Board of Directors recognizing that the achievement of full traceability was a process of time. Holstein Canada staff are collaborating with Dairy Farmers of Canada (DFC) as the lead organization for implementing a national dairy cattle traceability system.

Bridon Farms Inc.

Phoenix Bros.

Ferme Prés Verts inc.

Elmbridge Farms

Erbcrest Farm

Ferme Gilson inc.

Heather Holme Holsteins

Les Hectares Verts inc.

Maple-Ain Holsteins

Quecy Holstein

Raivue Farms Ltd.

Rock Hébert & Nathalie Dumais

Sandy Crest Holsteins

Shylane Holsteins

Smithden Holsteins Inc.

Stanhope Dairy Farm Ltd.

Stanton Farms

Sunspark Farms Inc.

Ferme Vinbert inc.

Wikkerink Farms Ltd.

BRIDON

DAPPLEDALE

DEPRESVERTS

ELMBRIDGE

ERBCREST

GILSON

HEATHER HOLME

HECTARE

MAPLE-AIN

QUECY

RAIVUE

ROTALY

SANDY CREST

SHYLANE

SMITHDEN

STANHOPE

STANTONS

SUNSPARK

VINBERT

WIKKERINK

Paris, ON

Greenbank, ON

Saint-Gabriel-de-Rimouski, Qc

Chilliwack, BC

Milverton, ON

Upton, Qc

Goderich, ON

Roxton Pond, Qc

Smith Falls, ON

Saint-Isidore-de-Dorchester, Qc

Sunderland, ON

Sainte-Hélène-de-Kamouraska, Qc

Arnprior, ON

Shakespeare, ON

Woodstock, ON

Victoria, BC

Ilderton, ON

Hepworth, ON

Acton Vale, Qc

Norwich, ON

6. MASTER BREEDER POINTS

Submitted by: Ontario Holstein Branch

“Whereas HAC takes great pride in long living high production cows; and

Whereas Master Breeder points are capped at 2E and 100,000 kgs.;

Therefore be it resolved that HAC consider awarding additional points for cows scoring 3E or higher or produce over 120,000 kgs.”

This resolution request was reviewed in detail by the Board of Directors and an ad-hoc Awards Committee has been appointed to review the entire Master Breeder Award formula. Consideration will be given to including a component for allocation of points based on longevity in addition to production and classification.

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2010 MASTER BREEDERS

Grillsdale Holsteins

2009 COW OF THE YEAR (presented in 2010)

•••

•

•

Blondin Skychief Supra EX-93-3E-CAN 15* (12/67)

2010 CENTURY OF HOLSTEINS AWARD

Campbellwood, ON1911 - 2010

Breeder: Ferme Blondin, (Simon Lalande), Saint-Placide, QcOwners: Ferme Blondin and Pierre Boulet, Montmagny, QcBest 305: 9yr. 17,354 kg M 710 kg F 4.1% 525 kg P 3.0%BCAs 355 397 339 Dev. +119 +127 +88Lifetime: 6 lacts: 119,657 kg M 4,630 kg F 3.9% 4,062 kg P 3.4% Average BCAs 276 268 2731 Superior Lactation

GENOMIC TESTING

Genomic testing continues to be an important service offered by

Holstein Canada to dairy producers. In September, Holstein Canada

partnered with Semex Alliance to launch GenoTest, which included

the newly available 3K test. At the same time nasal swabs were

offered as a convenient and effective method to collect DNA samples.

The use of genomic testing continues to expand as this technology

evolves and producers realize the benefits.

Genomic Testing completed in 2010*TotalNasalHair

50K 1,909 29 1,938

3K (Sept - Dec) 786 698 1,484

Total 2,695 727 3,422

*excludes testing for special research projects

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Grillsdale Holsteins

REGISTRY

BREED IMPROVEMENT

MARKETING

NLID

BOARD & EXECUTIVE

ADMINISTRATION

INFORMATION TECHNOLOGY

DEPRECIATION

$4,606,924

5,732,395

289,751

1,351,291

0

54,121

0

0

$12,034,482

SCHEDULE OF REVENUE AND EXPENSES

$4,193,879

5,407,436

239,648

1,282,995

0

53,259

0

0

$11,177,217

$1,705,118

3,899,397

928,467

1,361,792

1,170,286

985,807

975,019

411,273

$11,437,159

$1,637,239

3,710,208

881,056

1,227,255

1,217,641

1,149,704

1,109,659

439,429

$11,372,191

REVENUE2010 2009

EXPENSES

DEPARTMENT 2010 2009 2010 20092010 2009

EXCESS / (DEFICIT)

2010 2009

Total Revenue less

Total Expenses

= Excess (Deficit)

$597,323 ($194,974)

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FINANCIAL REPORT 2010Rhonda Morley, Chief Financial OfficerSteady growth in core services has resulted in a net Operating Fund

surplus of $597,323 for the 2010 fiscal year.

The general operating revenue increased by 10.8% and exceeded $12

million at year-end. This favourable performance reflected the increase

in activity for herdbook, classification, and genotyping services.

During 2010, increased sales activity was recorded for registrations,

classifications, herd visits, genomic testing services and National

Livestock Identification (NLID) tags. As predicted, membership

numbers of 11,205 reflected a 2% decline, which is consistent with

the trend for the past several years.

Total operating expenses of $11.4 million reflected a 3.5% increase

compared to last year. The cost of tags went up in relation to the

number of tag sets sold and the laboratory costs were higher due to an

increase in the number of genomic tests. Additionally, the Association

incurred greater market development costs for breeder incentives

related to enrolment programs.

Holstein Canada’s Reserve Fund totalled $6.59 million and consisted of

an investment portfolio with an asset allocation of 8% cash and cash

equivalents, 17% equities and managed funds and 75% fixed income.

The Association continued to follow a conservative investment strategy

whereby the portfolio is designed primarily to produce income while

protecting the principal investment.

The Development Fund was used to support the 2012 World Holstein

Conference as well as a herd recruitment and retention program.

During 2010 Holstein Canada contributed $36,972 in funds for the two

initiatives.

2011 OutlookThe outlook for 2011 is cautiously optimistic with an expectation of

slightly less activity and a small surplus budgeted for the Operating

Fund. Consistent performance from the Reserve Fund investments is

expected as the economy continues to strengthen.

The Association remains committed to the highest standard of

financial management while continuing to offer services and programs

of benefit to our members and customers.

2010 SOURCES OF REVENUE

40% Classification

38% Registration3% Information

Services

5% Genomic Testing

2% Marketing11% NLID 1% Administration

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STATEMENT OF OPERATIONS AND CHANGE IN FUND BALANCES

REVENUES

Income from Operations

Investment Income (Note 9)

$ 12,013,556

20,926

12,034,482

$ 298,813

298,813

$ 127

127

$ -

-

$ 12,013,556

319,866

12,333,422

$ 10,829,865

382,617

11,212,482

Year ended December 31, 2010

EXPENSES

Excess of Revenues Over Expenses

Transfer from Reserve to Development

Transfer from General to Development

Transfer from Development to Conference

Fair market value adjustment (Note 9)

Extraordinary Item -Funds received on dissolution

Fund Balances, Beginning

Fund Balances, Ending

RESERVEFUND

DEVELOPMENTFUND

CONFERENCEFUND

TOTAL 2010 TOTAL 2009OPERATINGFUND

11,437,159

597,323

(370,912)

5,662,854

$ 5,889,265

298,813

(107,217)

62,909

6,339,435

$ 6,593,940

11,974

(11,847)

107,217

370,912

(25,000)

21,871

$ 463,153

25,488

(25,488)

25,000

18,787

$ 18,299

11,474,621

858,801

0

0

0

62,909

0

12,042,947

$ 12,964,657

11,759,611

(547,129)

0

0

0

203,230

142,611

12,244,235

$ 12,042,947

STATEMENT OF FINANCIAL POSITION

CURRENT ASSETS

Cash and Bank (Note 3)

Temporary Investments (Note 4)

Accounts Receivable (Note 5)

Other Receivables

Inventory

Prepaids

Due (to) from other funds

$ 1,104,797

1,252,827

1,323,785

157,571

29,618

139,237

207

4,008,042

$ 372,888

178,602

551,490

$ 163,233

300,127

(207)

463,153

$ 18,299

18,299

$ 1,659,217

1,731,556

1,323,785

157,571

29,618

139,237

0

5,040,984

$ 691,249

1,428,649

1,235,946

135,191

13,998

122,480

0

3,627,513

as at December 31, 2010

RESERVEFUND

DEVELOPMENTFUND

CONFERENCEFUND

TOTAL 2010 TOTAL 2009OPERATINGFUND

CURRENT LIABILITIES

Accounts Payable & Accrued Liabilities

FUND BALANCES

Invested in Capital Assets

Unrestricted

$ 1,204,047

3,085,270

2,803,995

5,889,265

$ 7,093,312

6,593,940

6,593,940

$ 6,593,940

463,153

463,153

$ 463,153

18,299

18,299

$ 18,299

$ 1,204,047

3,085,270

9,879,387

12,964,657

$ 14,168,704

$ 933,237

3,353,816

8,689,131

12,042,947

$ 12,976,184

INVESTMENTS

Reserve Fund (Note 6)

CAPITAL ASSETS (Note 7) 3,085,270

$ 7,093,312

6,042,450

$ 6,593,940 $ 463,153 $ 18,299

6,042,450

3,085,270

$ 14,168,704

5,994,855

3,353,816

$ 12,976,184

14

STATEMENT OF CASH FLOWSYear ended December 31, 2010

CASH FROM OPERATINGACTIVITIES

Excess (deficiency) of revenue over expenses

Items not affecting cash

Amortization ofcapital assets

(Gain) / Loss on disposal of capital assets

(Gain) / Loss on sale of investments

Amortization of premiums / discounts onheld to maturity inventments

(Changes) in non-cashworking capital

Net cash provided by(used in) operating activities

INVESTING ACTIVITIES

Additions to capital assets

Proceeds on disposal ofcapital assets

Proceeds on sale ofinvestments

Investment purchases

Funds received ondissolution

Interfund transfers

Net cash used ininvesting activities

INCREASE/(DECREASE)IN CASH AND BANK

CASH AND BANK, BEGINNING OF YEAR

CASH AND BANK,END OF YEAR

OperatingFund

$ 597,323

TOTAL

$ 298,813 $ (11,847) $ (25,488) $ 858,801

411,273 411,273

5,004 5,004

(6,188) (23,781) (29,969)

(11,326) 8,792 (127) (2,661)

996,086 283,824 (11,974) (25,488) 1,242,448

131,901 3,323 (7,010) 128,214

1,127,987 287,147 (18,984) (25,488) 1,370,662

(167,731) (167,731)

20,000 20,000

956,234 656,218 300,000 1,912,452

(941,500) (625,915) (600,000) (2,167,415)

0 0

(503,909) (76,914) 153,129 25,000 (402,694)

624,078 210,233 134,145 (488) 967,968

480,719 162,655 29,088 18,787 691,249

$ 1,104,797 $ 372,888 $ 163,233 $ 18,299 $ 1,659,217

ReserveFund

DevelopmentFund

ConferenceFund

(370,912) (107,217) 453,129 25,000 0

$ (194,974) $ 357,187 $ (703,129) $ (6,213) $ (547,129)

439,429 439,429

5,526 5,526

(14,911) (3,762) (20,000)

(8,547) (60,748) (69,295)

226,523 292,677 (704,456) (6,213) (191,469)

169,393 (3,323) (25,022) 141,048

395,916 289,354 (729,478) (6,213) (50,421)

(492,630) (492,630)

38,400 38,400

1,400,017 689,699 432,500 2,522,216

(1,457,543) (867,925) (216,042) (2,541,510)

142,611 142,611

(511,756) (555,488) 711,331 25,000 (330,913)

(115,840) (266,134) (18,147) 18,787 (381,334)

596,559 428,789 47,235 1,072,583

$ 480,719 $ 162,655 $ 29,088 $ 18,787 $ 691,249

(519,873) 494,873 25,000 0

(1,327)

2010Operating

Fund TOTALReserve

FundDevelopment

FundConference

Fund

2009

15

NOTES TO THE FINANCIAL STATEMENTSYear ended December 31, 2010

The Holstein Association of Canada is a national organization

authorized to register Holstein cattle in Canada. The basic purpose of

the Association is to improve the breed of Holstein cattle. To this end,

it maintains a Herd Book and provides many services to its members

to assist them in evaluating, selecting and improving their herds. The

Association is a non-profit organization and accordingly is not taxable

by virtue of Section 149 (1)(e) of the Income Tax Act.

1. PURPOSE OF THE ORGANIZATION

The financial statements of the Holstein Association of Canada have

been prepared in accordance with generally accepted accounting

principles, and reflect the following policies:

2. SIGNIFICANT ACCOUNTING POLICIES

Fund AccountingRevenues and expenses related to service delivery and administrative

activities are reported in the Operating Fund.

The Reserve Fund reports assets, liabilities and revenues and expenses

needed to provide for future contingencies.

The Development Fund reports assets, liabilities and revenues and

expenses needed for special projects and business development.

The Conference Fund reports assets, liabilities and revenues and

expenses needed for the 2012 World Holstein Conference.

Revenue RecognitionThe Association recognizes revenue as services are rendered.

Contributions ReceivableContributions receivable are recognized as an asset when the amounts

to be received can be reasonably estimated and ultimate collection is

reasonably assured.

InventoryThe inventory is recorded at the lower of cost and replacement cost.

Financial InstrumentsThe Association utilizes various financial instruments which include

cash, accounts receivable, temporary and long-term investments, and

accounts payable. Unless otherwise noted, it is management’s opinion

that the Association is not exposed to significant interest, currency or

credit risks arising from these financial instruments and the carrying

amounts approximate fair values.

All transactions related to financial instruments are recorded on a

settlement date basis.

The Association classifies its financial instruments into one of the

following categories based on the purpose for which the asset was

acquired. The Association’s accounting policy for each category is as

follows:

Held-to-maturity investmentsThese assets are non-derivative financial assets with fixed or

determinable payments and fixed maturities that the Association’s

management has the positive intention and ability to hold to maturity

and comprises certain investments in debt securities, GIC’s and T-Bills.

These assets are initially recognized at fair value and subsequently

carried at amortized cost, using the effective interest rate method, less

any provision for impairment. Transaction costs related to held-to-

maturity investments are included in the amount initially recognized.

Available-for-sale investmentsNon-derivative financial assets not included in the above category are

classified as available-for-sale and comprise certain investments in

equity instruments, including the Association’s investments in private

companies. All such instruments have a quoted market price in an

active market and are carried at fair value with changes in fair value

recognized as a separate component of the fund balance. Where a

decline in the fair value is determined to be other than temporary, the

amount of the loss is removed from the fund balance and recognized in

the statement of operations and changes in fund balances. Transaction

costs related to available-for-sale investments are included in the

amount initially recognized.

Loans and receivablesThese assets and liabilities are accounts receivable and accounts

payable and accrued liabilities and are measured at their fair market

values which are equal to the carrying amounts due to their short term

nature.

16

Measurement UncertaintyThe preparation of financial statements in accordance with Canadian

generally accepted accounting principles requires management to

make estimates and assumptions that affect the reported amounts

of assets and liabilities at the date of the financial statements, and

the reported amounts of revenues and expenses during the reporting

period. Actual results could differ from management’s best estimates

as additional information becomes available in the future.

Capital AssetsThe Association’s capital assets are recorded at cost. Amortization is

provided as follows:

Composite Rates Method

Building

Sculptures

Office furniture and equipment

Automobiles

Data processing

30 yr.

20%

30%

3-5 yr.

Straight-line

Straight-line

Declining-balance

Straight-line

Also included in capital assets is a Fafard Sculpture. This asset is not

depreciated as it is considered to be a work of art.

The Association’s bank accounts are held at one chartered bank. The

bank accounts earn interest at average rate of 0.20%

3. CASH AND BANK

4. TEMPORARY INVESTMENTS

2009

GICs, due between May 6, 2011and December 3, 2013, with interest rates between 1.25% and 4.45%

2010

$1,429,181 $1,127,461

Ontario savings bonds, due June 21, 2014, variable interest

302,375 301,188

$1,731,556 $1,428,649

A significant portion of the Association’s trade accounts receivable are

to individuals/organizations in the agricultural industry and, as such,

the Association is exposed to all the risks of that industry.

5. ACCOUNTS RECEIVABLE

The Government of Canada bonds have a carrying value of $204,860

(2009 - $409,910), a fair value of $203,045 (2009 - $403,813) and an

interest rate of 4.50% (2009 – 4.50%-9.50%). This investment will

mature within 2-5 years.

The Canadian provincial and public authorities bonds have a carrying

value of $2,245,511 (2009 - $2,042,631), a fair value of $2,232,408

(2009 - $2,033,095) and interest rates of 3.70%-6.00% (2009 – 4.40%-

6.00%). These investments will mature as follows: $200,310 within 1

year, $506,588 within 2 to 5 years and $1,525,510 after 5 years.

The Canadian corporate bonds have a carrying value of $2,140,548

(2009 - $2,244,448), a fair value of $2,119,962 (2009 - $2,224,419)

and interest rates of 4.10%-8.30% (2009 - 4.10% - 8.30%). These

investments will mature as follows: $300,190 within 1 year, $805,557

within 2 to 5 years and $1,014,215 after 5 years.

6. LONG-TERM INVESTMENTS - RESERVE FUND

2009

Bonds and debenturesGovernment of CanadaCanadian province and public authoritiesCanadian corporate

2010

$203,0452,232,4082,119,9624,555,415

$403,8132,033,0952,224,4194,661,327

Held to maturity investments:

Available for sale investments:

Preferred SharesEquitiesManaged Equities

359,301569,395558,339

$6,042,450

339,465481,057513,006

$5,994,855

Bonds and Debentures

The preferred shares have a carrying value of $363,980 (2009 - $363,980)

and a fair value of $359,301 (2009 - $339,465). The preferred dividend

yields range from 4.75%-6.00% (2009 – 4.75%-6.00%).

Preferred Shares

The equities consist of common shares with a carrying value of

$574,967 (2009 - $486,565) and a fair value of $569,395 (2009 -

$481,057). The shares have no fixed maturity dates and are generally

not exposed to interest rate risk. Dividends are generally declared on

an annual basis.

Equities

These equity pools have a carrying value of $552,797 (2009 - $551,405)

and a quoted market value of $558,339 (2009 - $513,006).

Managed Equities

17

Held to maturity investments:

The Association maintains a defined contribution pension plan for

all employees whereby it will match employee contributions up to a

maximum of 5% of salary. The pension expense for the year was

$211,627 (2009- $219,743).

8. PENSION PLAN

7. CAPITAL ASSETS

The operating fund investment income is comprised of interest income

from a bank account in the amount of $1,177 and interest income in the

amount of $19,749 on held to maturity investments.

The reserve fund investment income is comprised of interest income in

the amount of $283,824 and net gains/losses in the amount of $14,989

on investments classified as held to maturity or available for sale.

The development fund investment income is comprised of interest

income in the amount of $127 on held to maturity investments.

For available for sale investments held in the reserve fund, the total

amount of the gain recognized to adjust these investments to fair market

value at year end is $62,909 and has been included in the reserve fund

statement of operations and changes in fund balances.

9. INVESTMENT INCOME

Management has established policies and procedures to manage

risks related to financial instruments, with the objective of minimizing

any adverse effects on financial performance. A brief description of

management’s assessments of these risks is as follows:

(a) General Objective, Policies and Processes:The Board and management are responsible for the determination of the

Association’s risk management objectives and policies and designing

operating processes that ensure the effective implementation of the

10. FINANCIAL INSTRUMENT RISK EXPOSURE AND MANAGEMENT

Land

Building

Fafard Sculpture

Office furniture and equipment

Automobiles

Data processing

TOTALS:

$328,851

3,008,125

177,525

1,269,112

831,155

4,080,189

$9,694,957

$902,584

1,249,730

416,470

4,040,903

$6,609,687

$328,851

2,105,541

177,525

19,382

414,685

39,286

$3,085,270

$328,851

3,008,125

177,525

1,268,879

837,437

4,119,219

$9,740,036

$802,284

1,248,621

358,660

3,976,655

$6,386,220

$328,851

2,205,841

177,525

20,258

478,777

142,564

$3,353,816

objectives and policies. In general, the Association measures and

monitors risk through the preparation and review of monthly reports

by management.

(b) Credit Risk:Financial instruments potentially exposed to credit risk include cash

and cash equivalents and accounts receivable. Management considers

its exposure to credit risk over cash and cash equivalents to be remote

as the Association holds cash deposits at one major Canadian bank.

Accounts receivable are not concentrated significantly and therefore

the carrying amount of accounts receivable represents the maximum

credit risk exposure.

(c) Interest Rate Risk:The Association is exposed to interest rate risk arising from fluctuations

in interest rates depending on prevailing rates at renewal of investments.

To manage interest rate exposure, the Association invests in fixed

income vehicles backed by a chartered bank.

(d) Liquidity Risk:Liquidity risk is the risk the Association will not be able to meet its

financial obligations as they come due. The Association has taken

steps to ensure that it will have sufficient working capital available to

meet its obligations.

The Association considers its capital to be comprised of its net assets

and deferred contributions. The Association is in compliance with all

its externally imposed capital requirements.

The Association manages capital to safeguard the organization’s ability

to operate and to meet its financial obligations as they become due.

11. CAPITAL MANAGEMENT

18

ACCUMULATEDAMORTIZATION

NET BOOKVALUE

COSTCOST ACCUMULATEDAMORTIZATION

NET BOOKVALUE

2010 2009

ASSET