It’s hard to believe that a year has passed since our initial offering statement. Here we are with the first of our investment returns already being made!
Those investors who purchased our 5-year Bonds Series M1-5 are receiving payments on the anniversary of their investment. As you get your letters and cheques, here are a few answers to commonly asked questions, and a behind the scenes look at how your returns are calculated.
How am I paid?
For those invested in RRSP accounts with CWCF, your payment will be deposited as cash in your CWCF account. From there it’s up to you whether it stays as cash with CWCF, or you re-invest in our Bonds Series N1-5, or another opportunity.
For non-registered investments, your cheque is being mailed to you directly.
I have an RRSP with CWCF. What can I invest in?
If you haven’t yet invested in this year’s Bonds Series N1-5 with CED Co-op, that’s a great place to start. You can invest $1,000 in Bonds Series N1-5 each year for 10 years, earning an aggregate 6.13% return, and continuing to support clean, green energy. This investment can be held in your CWCF RRSP account.
If you have already invested in Bonds Series N1-5, CWCF may have other investment opportunities, including other co-ops you can invest in, and other values-based funds. Contact Kristin Glenn at CWCF to learn more.
Finally, you could transfer your payment out of your CWCF account and into an RRSP account with another institution. Note: CWCF will charge a $50 withdrawal fee for this request. Contact Kristin Glenn at CWCF to make this transaction.
I didn’t invest in M1-5, when do I get paid?
Investors in Bonds Series L1-4 receive their payments 8 years, 12 years, 16 years, and 20 years after their initial investment.
Shareholders receive dividends at the discretion of the Board of Directors. The Board discusses our co-op’s financial position and upcoming commitments at each meeting and will issue a dividend when appropriate.
I’m glad I got paid, but how is my cheque calculated?
The first table on your letter shows how your initial investment was allocated between the 5 bonds, the interest rate on each, and the payout you will get at maturity. Let’s look at an example with a $10,000 initial investment.
Table 1
Bond | Allocation | Yield | Maturity (Years) | Initial Price | Face Value (Payout at Maturity) | |
M1 | 24% | 5.50% | 1 | $ 2,400.00 | $ 2,532.00 | October 9, 2016 |
M2 | 22% | 5.75% | 2 | $ 2,200.00 | $ 2,460.27 | October 9, 2017 |
M3 | 20% | 6.00% | 3 | $ 2,000.00 | $ 2,382.03 | October 9, 2018 |
M4 | 18% | 6.25% | 4 | $ 1,800.00 | $ 2,293.97 | October 9, 2019 |
M5 | 16% | 6.50% | 5 | $ 1,600.00 | $ 2,192.14 | October 9, 2020 |
Total | 100% | $ 10,000.00 | $ 11,860.41 |
As per our offering statement, your investment wasn’t split evenly between the bonds. Instead percentages were used (Table 1: Allocation), each with a different interest rate (Table 1: Yield), and maturing in successive years (Table 1: Maturity).
The initial price (Table 1: Initial Price) shows the amount of your investment allocated to each bond (take your total investment, multiply by the Allocation for that bond).
Your payout each year (Table 1: Face Value) is calculated by multiplying the initial price for that bond by the interest rate for that bond, compounded annually.
Example – Calculating Payout for Year 1
- Bond M1 was payable October 9, 2016
- Multiply M1’s allocation (24%) by your total investment ($10,000.00) to get the initial price of M1 ($2,400.00)
- Multiply the initial price of M1 ($2,400) by the yield (5.50% or 0.0550) to get the interest ($132.00)
- Add the interest ($132.00) to the Initial Price ($2,400.00) to get the Face Value ($2,532.00)
- Alternatively, you could multiply the Initial Price by 100% + the yield (105.5% or 1.055) to get the Face Value, if you aren’t interested in knowing the interest separately
In subsequent years, it gets trickier because your investment compounds.
Example – Calculating Payout for Year 2
- Bond M2 was payable October 9, 2017
- Multiply M2’s initial price ($2,200.00) by the 100% + the yield (1.0575) to get the value of M2 after year 1 ($2,326.50)
- Now multiply the value of M2 after the first year ($2,326.50) by 100% + the yield (1.0575) to get the value of M2 after year 2 ($2,460.27). This is your payout.
- Alternatively, you can use an exponent to do the work of compounding for you. Multiply the initial price ($2,200.00) by 100% + the yield (1.0575) raised to the power of the number of years between purchase and maturity (2)
- Initial Price x Yield ^{Years to Maturity}
- $2,200 x 1.0575 ^{2}
- $2,460.27
How do you calculate interest for my T5?
For those with non-registered investments, your interest earned will show up on your T5 as income. T5 interest is calculated by adding up the interest earned that year on each of the 5 individual bonds. Table 2 shows the interest for each tax year.
Table 2
T5 Income Tax Year | Payout | T5 Interest | T5 Issued |
2016 | $ 2,532.00 | $ 595.00 | Feb-2017 |
2017 | $ 2,460.27 | $ 491.27 | Feb-2018 |
2018 | $ 2,382.03 | $ 379.79 | Feb-2019 |
2019 | $ 2,293.97 | $ 260.56 | Feb-2020 |
2020 | $ 2,192.14 | $ 133.79 | Feb-2021 |
Totals | $ 11,860.41 | $ 1,860.41 |
Example – Interest earned in Year 1, tax year 2016
Multiply the initial price of each bond (Table 1: Initial Price) by the yield (Table 1: Yield). Add these together to show the total interest earned on your investment.
- ($2,400 x 0.055) + ($2,200 x 0.0575) + ($2,000 x 0.06) + ($1,800 x 0.0625) + ($1,600 x 0.065)
- Total interest earned is $595.00
Just like our payout calculation above, interest earned gets tougher to calculate for the following years because you are now earning interest on the growing amounts in each bond, instead of the initial investment.
Your goal is to find the difference between the value of the bonds after your tax year, and the value of the bonds after the previous year. This represents the interest earned that you will be taxed on.
Example – Interest earned in Year 2, tax year 2017
We will use the same steps as we used to determine value at maturity:
Initial Price x (1 + yield) ^{years}
We can do this for each of the bonds where years = 2 (the value after 2 years), and where years = 1 (the value after 1 year).
Subtracting the value after 1 year from the value after 2 years gives us the growth in our investment during year 2 due to interest.
Don’t forget – M1 has already been paid, so you don’t need to include it!
M2 after 2 years
- Initial investment = $2,200.00
- 1 + yield = 1.0575
- Years = 2
- $2,200.00 x 1.0575 ^{2} = $2,460.27
M2 after 1 year
- Initial investment = $2,200.00
- 1 + yield = 1.0575
- Years = 1
- $2,000 x 1.0575 ^{1} = $2,326.50
Difference in M2 between year 2 and year 1
- $2,460.27 – $2,326.50 = $133.77
Therefore, the interest earned on M2 during the second year was $133.77
Repeat these steps for bonds M3, M4, and M5, then add the interest earnings together to get your total interest earned in year 2.
Thanks for the explanation, but that sounds like a lot of math!
That’s why we have taken care of it for you in the tables in your letter. Of course, if you want to check our work you can either speed up the process by entering the equations in an Excel spreadsheet, or sharpen your pencil, sit down with a pad of paper, and crunch the numbers!
I still have some questions…
If you have questions about your payments, CED Co-op investments, or just want to chat about the state of renewable energy generation in Ontario, feel free to get in touch.
Can you contact me so we can discuss my individual account with you? I have some questions. Many thanks, Felicia
Thanks Felicia, we have replied via email so we can answer questions about your account.