Inuvialuit Investment Corporation

The Inuvialuit Investment Corporation (IIC) oversees management of a diverse securities portfolio that was initially established with proceeds from the Inuvialuit Final Agreement. IIC's mandate is to achieve the highest possible returns using conservative investment strategies that preserve capital and increase financial resources in order to benefit of future generations of Inuvialuit.

Its specific objectives are to:

• Protect the value of the investment funds entrusted to IIC.
• Earn a before-tax real rate of return of 5% over the long-term.
• Manage investment funds on behalf of other members of the Inuvialuit Corporate Group, the Inuvialuit Harvesters Assistance Trust, and the Community Corporations.

In order to balance risk and return objectives, in 1977 IIC adopted a revised Statement of Investment Policies and Goals. The resulting asset allocation model set investment targets of 60% equities and 35% fixed income securities, with permissible deviations of up to 5%.

IIC ended 2005 with recorded income of $12,610,000, well ahead of budget due to strong equity markets, particularly in Canada.

In 2004, new Canadian accounting rules changed the way IIC reports its financial results. Up to the end of 2003 changes in the value of the portfolio were recognized only when the individual assets (stocks or bonds) were sold. Since 2004, changes in the market value of the assets in the portfolio have been reported as an increase or decrease in revenue. This results in IIC reporting wider swings in profit (and loss) caused by the markets.

Removing the unrealized gains and losses from the financial report, IIC had actual earnings of $7,969,000 in 2005 compared to $4,771,000 in 2004. This is the amount incorporated in the Inuvialuit Corporate Group results and used to calculate IIC's share of the distribution to beneficiaries.

IIC's ongoing obligations require it to generate significant amounts of cash throughout the year. Major cash outlays in 2005 included $1,466,000 to fixed income participants in the portfolio (Community Corporations, ISDP, IEF and ICF, etc.), management fees to IRC of $2,158,000, gross portfolio administration fees of $802,000, a share of the beneficiary distribution of $1,080,000 and income tax of $2,943,000.

At the end of 2005, the IIC portfolio (Heritage Fund) was valued at $176,100,000, an increase from $165,100,000 in 2004. On the year, the actual return was 10.81% compared to the target or benchmark of 11.3%. Over a four-year evaluation period, IIC achieved a 8.3% return compared to the target or benchmark of 6.8%.

In 2005, the market value of the financial assets administered by IIC was $276,300,000 at year-end compared to $257,000,000 at year-end in 2004.

The IIC Board members in 2005 were Frank Hansen (Chair), Lucy Kuptana , Evelyn Storr, Michael M. Koerner and Barry Wainstein.

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