About Share Redemptions

MEC exists to provide members with quality products at reasonable prices. We aim to stay financially healthy and our goal is to generate a modest annual surplus. In the years MEC earns a surplus, it is usually allocated to members in the form of a patronage dividend.

The amount is based on how much money that member spent at MEC during the year. In turn, the dividend is applied to the purchase of additional shares in MEC.

Pooling members' shares for mutual benefit helps MEC maintain solid financial health. In other words, members' equity is retained in MEC to finance our operations and improve our ability to serve members by investing in inventory, new stores, and infrastructure. The amount of patronage shares each individual member accumulates is small, but is significant when it is pooled with those of all other members.

What is a Patronage Share Redemption?

Over time some members accumulate higher patronage share values than others, with the result that not everyone is vested equally in the financial health of the Co-op. MEC believes that since all members enjoy the same rights and privileges, all members' financial participation should be similar.

Each year the Board of Directors evaluates MEC's financial health to determine whether there is sufficient capital to meet future needs. If there is sufficient capital, MEC will redeem or buy back some patronage shares from members.

We concentrate on redeeming shares from those members who have the highest number of shares, in order to ensure that individual member investment on MEC is kept at an equitable level.

How do patronage shares and redemptions work?

Using hypothetical member number 123-4 as an example and remembering that the value of a single share is always $5, here is how the process works:

Year 1:

Member 123-4 joins and spends $1000 at MEC. At the end of year 1 MEC has a surplus of 3%, or $6 million on total sales of $200 million. A patronage dividend is declared, and the surplus is allocated to members in proportion to their purchases during that year.

Year 2:

Member 123-4 spends $5000 at MEC. At the end of year 2, MEC has a surplus of 4%, or $8.4 million on total sales of $210 million, and declares a patronage dividend.

Year 3:

There is a surplus of 3.5% but Member 123-4 made no purchases, and thus receives no patronage dividend for the given year, but the Board decides that MEC will redeem shares so that each member holds a maximum of 15 shares. Member 123-4 receives a cheque for $160 to reduce their shares from 47 to 15.

Join [1 share $5]
+ [$1000 purchased x 3% = $30 or 6 patronage shares ]
= [ end of year 1: 7 shares $35]

+ [ $5000 purchased x 4% = $200, or 40 patronage shares ]
= [ end of year 2: 47 shares $235]

- [ share redemption: 32 shares = $160 cheque to member ]
= [ end of year 3: 15 shares $75]

Can members redeem their patronage shares?

Yes, at any time. MEC regularly buys back patronage shares from members. Usually the Board determines how many shares will be bought back by examining the financial health of the organization. But any member can apply to have all their shares paid out in full at any time and in so doing cease to be a member. Members can also access a credit note that gives details about their patronage dividend each year.