Most of Terrapin's investors place their funds directly in the mortgage investment fund by purchasing preferred shares of Terrapin Mortgage Investment Corp. Throughout the year Terrapin issues preferred shares to investors (see schedule) and invests the proceeds in a portfolio of mortgages receivable. Interest and fees are earned throughout the fiscal year and the accumulated net earnings are distributed either quarterly or annually at the choice of the investor.
Investors can decide whether they want to receive their income in cash or in additional shares of Terrapin to facilitate long-term growth and compounding. The vast majority of Terrapin's shareholders historically have chosen to roll their investment over to benefit from the compounding of their annual return.
Investors looking to grow their investments by leaving funds in Terrapin, or those investors who do not require frequent distributions should consider investing in Terrapin's Class "A" Preferred shares. They will receive their dividend which is distributed to shareholders within 90 days of the Company's February 28 year end based on their shareholdings at the end of the year. The income is treated as interest in the hands of the investors.
For those investors requiring cash flow throughout the year, we have introduced Class B Preferred shares that will pay partial dividends quarterly with the balance after our fiscal year end audit. These Class "B" Preferred shares have a minimum investment amount of $250,000, and have the same rights and restrictions as the Class "A" Preferred shares but pay dividends quarterly and the final distribution is discounted by 30 basis points (0.30%) to cover the additional costs of administration and tying up capital.
The quarterly distribution for the new Class B Preferred shares is scheduled as follows:
| Distribution Dates |
Quarterly Distribution % |
| May-31 |
1.5% |
| Aug-31 |
1.5% |
| Nov-30 |
1.5% |
| Feb-28 |
1.5% |
| May Dividend Distribution |
Remainder* |
*Annual dividend declared less quarterly distributions during the year, less 30 basis points. Dividends declared are at the discretion of the Board of Directors. Dividends may not be declared if it is determined by the directors to not be in the best interest of shareholders or if it would cause financial hardship for the Company. Distributions dates are approximate dates and may differ due to the processing time required or delays with the postal service that are beyond management's control.
One of the benefits of investing in Terrapin is that the company qualifies as a Mortgage Investment Corp. (MIC) as defined under the Income Tax Act. Thus Terrapin is able to take advantage of the qualified investment rules of the Income Tax Act. Essentially the Act allows income from a MIC to "flow through" to an investor's RRSP without any corporate income tax being deducted. If funds are held in an RRSP, income from the shares is not taxable in the hands of investors until the funds are withdrawn by the holder allowing tax free compounding of the investment.
The company is also able to accept direct investments from individuals and corporations that do not wish to utilize an RRSP. The non-RRSP investments also benefit from the tax efficient structure in that income is distributed to investors without being reduced by corporate tax in Terrapin. Because the investment is tax efficient, investors grow their balance at a greater rate than with taxable investment entities.
Buying Shares of Terrapin MIC:
Typically investors instruct their bank or trust company to purchase shares of Terrapin through their self directed RRSP account or investors may purchase the shares directly if not held in an RRSP. There is a minimum investment amount of $25,000 per shareholder for Class "A" shares and $250,000 for Class "B" Shares. Terrapin issues preferred shares throughout its fiscal year based on the expected earnings for the year. The company has a February 28th year-end and the purchase price of the shares will be as set out below on a monthly basis. The premium on share price in excess of the par value of $1.00 per share should be approximately equal to the accumulated earnings of the company for the year. Thus investors should have a similar annualized return no matter what time of year they purchase shares.
| Fiscal year ended February 28, 2011 |
Premium |
| March 1 - March 31 |
1.000 |
| April 1 - April 30 |
1.006 |
| May 1 - May 31 |
1.012 |
| June 1 - June 30 |
1.018 |
| July 1 - July 31 |
1.024 |
| August 1 - August 31 |
1.030 |
| September 1 - September 30 |
1.035 |
| October 1 - October 31 |
1.041 |
| November 1 - November 30 |
1.047 |
| December 1 - December 31 |
1.053 |
| January 1 - January 31 |
1.059 |
| February 1 - February 28 |
1.065 |
Shares can be purchased at any time during the year as per the above share purchase premium schedule. Share subscription forms required to purchase preferred shares can be secured from the company offices by contacting Karen Hung (telephone: 604-684-8277 extension 4324; fax 604-684-4709; email:
karenh@tmic.ca) or Jeff Morgan (telephone: 604-684-8277 extension 4309; fax: 604-684-4709; email:
jeffm@tmic.ca).
Dividend Policy:
For Class "A" Preferred shareholders, the net income is distributed to the shareholders within 90 days of the Company's February 28 fiscal year end, based on their shareholdings at February 28 each year.
The Class "B" Preferred shareholders will be paid partial dividends quarterly and the balance discounted by 30 basis points (0.30%) within 90 days of year end. The final distribution is discounted to cover the additional costs of administration and tying up capital.
The quarterly distribution for the Class B Preferred shares is scheduled as follows:
| Distribution Dates |
Quarterly Distribution % |
| May-31 |
1.5% |
| Aug-31 |
1.5% |
| Nov-30 |
1.5% |
| Feb-28 |
1.5% |
| May Dividend Distribution |
Remainder* |
*Annual dividend declared less quarterly distributions during the year, less 30 basis points.
Dividends declared are at the discretion of the Board of Directors. Dividends may not be declared if it is determined by the directors to not be in the best interest of shareholders or if it would cause financial hardship for the Company.
Distributions dates are approximate dates and may differ due to the processing time required or delays with the postal service that are beyond management's control.
Investors should be aware that they must be investors as at the designated distribution date as dividend distributions can only be made to shareholders on record as at those dates. If you are unsure or have questions please contact us in advance.
Redemption Feature of Shares:
The shares for which you will subscribe are redeemable preference shares, which can be redeemed at the option of the directors of the company. Redemption may require up to six months' notice as the mortgage company may not be in a completely liquid position and it could take that long for the necessary cash for redemption to be available. Shares are redeemed at their par value of $1.00 per share. The reason for this is explained above under dividend policy. Therefore it is usually prudent for investors to wait until after the February 28 year end before redeeming any shares.
Minimum Investment:
There is a minimum investment amount of $25,000 per shareholder for Class "A" shares and $250,000 for Class "B" Shares. Once the minimum has been purchased, additional shares may be purchased with a minimum $5,000 subscription by completing the required subscription forms for each subsequent purchase.
Historic Return on Investment (ROI):
| |
2011 |
2010 |
2009 |
2008 |
2007 |
| R.O.I. |
6.2% |
7.1% |
9.2% |
11.2% |
10.4% |
| |
|
|
|
|
|
| |
3 Year |
5 Year |
10 Year |
|
|
| R.O.I. average |
7.5% |
8.8% |
8.9% |
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| |
|
|
|
|
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Past earnings are not an estimate of future earnings. Investors should consider getting independent investment and/or tax advice to determine if investing in a MIC is right for them given their investment criteria.
The above earnings are net of all management costs, legal, accounting and overhead expenses which we seek to keep below 1.5% combined.
Through an RRSP:
To purchase shares using their RRSP, investors are required to have a self directed RRSP account at a bank, brokerage firm, or trust company. The investor instructs their trust company to purchase the specified amount of shares. The trust company will exchange the payment for share certificates along with the required forms. Our mortgage administrators can help answer any questions you may have and suggest names of trust companies other investors have used in the past. Please click here for our contact information.
Direct Investment:
Corporations and individuals that do not want hold their investment in an RRSP simply have to contact us to receive the required forms and can hold their investment directly or through a bank, brokerage firm, or trust company.
