UFA’s equity structure is a source of capital and considerable financial strength. As a co-operative, UFA provides members’ benefits by allocating a portion of its taxable earnings to members in the form of a patronage allocation.
Member shares, patronage allocation, revolving equity, investment shares and contributed surplus are considered member entitlements of UFA. A summary of member entitlements is outlined in the notes to the consolidated financial statements.
UFA is authorized to issue an unlimited number of member shares with a par value of $5. Member shares are redeemable at par value when the member reaches age 65, moves out of the trading area, or upon a member’s death. Member shares are eligible for a Board declared annual dividend. A dividend of $0.5 million was paid out on member shares in 2016 (2015 - $0.5 million).
When UFA Co-operative Ltd. has taxable income before patronage allocation and income taxes, a patronage allocation may be ratified by elected officials at the annual general meeting. If approved by the assembly, under UFA’s by-laws, the patronage allocation is distributed. For 2016, no patronage has been allocated for distribution due to insufficient earnings.
Revolving equity is non-interest bearing, non-redeemable by the member (except in specific circumstances) and is converted to investment shares in equal amounts over a 12-year period unless waived by the Board. The Board has waived the conversion of Revolving Equity into Investment Shares for 2017. In addition, revolving equity automatically converts to investment shares at age 65.
Investment shares have a par value of $100; are nonvoting; and are redeemable at par value at the option of the holder subject to Board approval. They are also retractable at par value at the option of UFA and are paid a dividend at bank prime rate less 0.5 per cent. Dividends on investment shares totaled $2.8 million in 2016 compared to $3.0 million in 2015, and are charged against retained earnings.
Distributions to members in the five years ending in 2016 totaled $109.7 million and consist of the cash portion of the annual patronage allocation, the issuance of investment shares, dividends on investment shares, dividends on member shares and retirement of members’ equity.