Indexed Linked Term Deposits
Income
Index-Linked Term Deposit will pay 100% of the
percentage difference between the Starting Value and the
Average of Sets Value of the Index on the final
Valuation Date, multiplied by the Participation Rate,
multiplied by the Principal Amount.
Terms
Three-year
Minimum Investment
$1000.00
Commissions, Management and Administration Fees
None.
Redemptions
Not redeemable prior to maturity.
Retirement Planning
The term deposit is RRSP eligible.
Deposit Insurance
The principal and any return on Index-Linked Term
Deposits are insured subject to prescribed insurance
limits in accordance with the terms and conditions of
the Credit Union’s deposit insurance coverage. Please
ask your Credit Union for a brochure issued by the
deposit insurer for the details.
Who Should Consider an
Index-Linked Term Deposit?
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Investors who are looking for a
deposit with a principal guarantee that offers the
potential for a higher return than the return paid
on fixed rate deposits.
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Investors who are looking for
an equity-linked investment that carries no fees or
commissions.
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Individuals searching for a
diversified investment in Canadian corporations.
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Individuals who are not willing
to risk their initial investment.
Income Tax
Tax will be deferred on Index-Linked Term Deposits held
inside registered plans. However, the income tax
consequences of holding an Index-Linked Term Deposit
outside a registered plan will depend upon a holder’s
particular circumstances, and holders should consult
their tax advisors before considering the investment
outside a registered plan.
Calculating the Interest
The investment return on the deposit will be based upon
the participation rate multiplied by the average return
of the S&P/TSX 60 Index over the term of the deposit.
The average is calculated by adding the monthly
averaging date closing values for the S&P/TSX 60 Index
between the start date and the maturity date and
dividing that total by the months in the term (36 for
the three-year deposit). The investor will receive the
percentage difference between the average and the
starting value, multiplied by the participation rate.
Risks
Unlike other term deposit, there is no guaranteed return
on this product. Depending on the performance of the
stocks comprising the S&P/TSX 60 Index over the term, it
is possible that, at maturity, the investor will receive
only their principal back.
Examples:
Each example starts with an investment size of
$1,000 with the index starting value at 450.
Three-year example:
The average of the monthly values of the S&P/TSX 60
Index over the term of the deposit is 500. The
Participation Rate is 100%. At the maturity date of
the deposit the investor will receive:
[(500 – 450)/450] * 1.00 =
11.11%
$1,000 x 11.11% = $111.10 plus the original
$1,000.
The compounded annual rate of
return based on the exact term of the deposit is
3.57%.
Should the average of the monthly index sets be
lower than the start value of the index, the return
on the deposit will be 0.00% and the investor will
receive only their principal investment back at
maturity.
S&P/TSX 60 Index
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The S&P/TSX 60 Index tracks
sixty foremost companies in leading industries in
Canada, providing investors with a broad but
manageable index. Candidates for the S&P/TSX 60
Index are evaluated for ample liquidity and
efficient share pricing, as well as representation
of important industry segments within Canada.
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The S&P/TSX 60 Index provides
economic diversity over eleven market sectors. These
include Basic Materials, Capital Goods,
Communication Services, Consumer Cyclical, Consumer
Staples, Energy, Financials, Health Care,
Technology, Transportation and Utilities.
-
S&P/TSX 60 Index
-
(For current listings please
see
www.globeinvestor.com).
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