PURPOSE

The purpose of the Member Equity Plan is to provide each member with an opportunity to participate in the financial success of their credit union.

In any business, it is important to have an adequate level of capital, or ownership equity. Winnipeg Police Credit Union has developed a strong capital position over the years and is committed to continued growth and a strong equity base in the future.

The amount each member receives is based on patronage of Credit Union services, since it is members' patronage which, in effect, makes the earnings possible.

Some common questions are:

1)    How Does the Member Equity Plan Work?

After satisfying requirements for reserves, the Board of Directors may set aside a portion of profit for members who have borrowed and saved at the Credit Union.

Allocations are approved by the Board and are reported to the members at the Annual General Meeting. The allocation is distributed to the members in the form of Surplus Shares. This ensures a strong equity base for the future of Winnipeg Police Credit Union while ensuring that the members benefit in relation to their patronage of Credit Union services.

2)    What Type of Accounts Qualify for the Member Equity Plan?

All members with loans and savings with the Credit Union qualify to participate in the Member Equity Plan when declared by the Board of Directors.

For loans, all the interest paid on personal loans, mortgages, business loans and lines of credit qualify for the member equity allocation.

For deposits, all interest earned on savings, GICs and term deposits invested with Winnipeg Police Credit Union qualify.

3)    How Much Will Each Member Be Allocated?

Members are allocated a percentage of the interest they earned and the interest they paid during the year. These individual allocations will be credited in the form of Surplus Shares to their individual Member Equity Plans.

The allocation rate may vary from year to year and is dependent on the amount of earnings at year end. The rate may also vary between savings and term deposit interest as compared to loan and line of credit interest, depending on the contribution earnings they made.

4)    Will Allocation Be Made Each Year?

The Board of Directors will decide each year whether or not earnings warrant an allocation to the Member Equity Plan.

5)    Can A Member Withdraw These Funds?

The Surplus Shares which make up the individual Member Equity Plan cannot be redeemed by any active member prior to reaching 65 years of age. Like the $5 membership share the Member Equity Plan is your vested interest in the operation of the Credit Union now and for the future.

6)    Under What Circumstances Can A Member Withdraw the Funds from the Member Equity Plan?

There are special circumstances under which a complete redemption of the Surplus Shares in the Member Equity Plan may be allowed by the Board of Directors:

If the value of the surplus share exceeds $10.00, then the redemption request needs to be submitted to the Board of Directors for approval, which is reviewed on a bi-annual basis.  Please contact the Credit Unio for more details.

All above redemptions must comply with subparagraph 2.02 of the Articles of Incorporation of Winnipeg Police Credit Union Limited.

7)    Does This Plan Change Member Voting Rights?

No..... voting rights are associated only with the $5 common share held by each member. Each member has only ONE vote regardless of the amount of their Surplus Share.

8)    What Type of Statements Will Be Issued and How Often?

All participating members will receive a notice annually advising them of the allocation of Surplus Shares. The member's Surplus Shares or RRSP Surplus Shares will be shown annually on their September statements.

9)    Will Member Equity Plans Earn Interest?

No interest will be paid on Member Shares Plans. However, the Board of Directors may allocate dividends to the existing Surplus Shares that make up Member Equity Plans on an annual basis. To date, an average annual dividend of 10% has been credited to Member Equity Plans.

10)  Are Funds in MEMBER EQUITY PLANS Guaranteed?

Because the Member Equity Plans consist of Surplus Shares and represent true equity, they are considered risk capital and therefore are not guaranteed. However, it is unlikely that Surplus Shares would have to be called upon because our Credit Union has a strong level of reserves and these reserves would have to be depleted first.

11)  What about Income Tax?

"DEPOSITS"

An allocation to Surplus Shares based on interest earned on savings, or term deposits or existing Surplus Shares is taxable. Therefore, any allocation based on savings is included in the T5 income tax slip issued by The Credit Union.

"LOANS"

An allocation based on interest paid on a loan is only taxable if the loan was for a taxable expense, as in the case of a business loan. It is the responsibility of the member to determine if the allocation is taxable and to report it if necessary on their income tax.

"RRSPs"

Any allocation to "RRSP Surplus Shares" in the form of either Patronage Dividends or dividends on Surplus Shares is tax sheltered. It is taxable only when funds are withdrawn from "RRSP Surplus Shares".

12)  Do All Members Participate in the Program?

All members paying or receiving qualifying interest in a sufficient amount to warrant an allocation of one dollar or more will be allocated Surplus Shares to their Member Equity Plans.

13)  Why Does the Credit Union Not Charge Less on Loans and/or Pay more on Deposits So That No Earnings Are Generated?

The Credit Union operates in a constantly changing financial environment and is affected by interest rate changes and other unpredictable changes to income and expenses. Therefore, it is essential that the Credit Union build in a margin of safety to be able to handle these fluctuations.

This program helps maintain a strong equity position while allowing the membership to share in the earnings of the Credit Union.

Your increasing patronage in loans and savings increases your participation in the Membership Equity Plan.

14)  Can I Transfer My Surplus Shares into a Surplus Share RRSP and Get a Tax Deduction?

Yes, once you have accumulated a minimum off $300 in Surplus Shares.