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Strategic Direction

2007 brought into our fund the last payment from the Government of Canada.  We now carry on our shoulders the burden of having to achieve our mandate with nothing but the assets we held after that last payment was received..

Our trust deed has not changed and as a result neither has our mandate. The Trustees must still:

• Invest as a prudent person would (which means we must invest only in securities in which a reasonably knowledgeable individual interested in making a good investment return of income while preserving his/her capital would invest); and

• Preserve the real buying power of trust assets for future generations (which means we must make sure that the assets of the trust will grow at the rate of inflation over the long term); and

• Distribute all of the income for tax purposes to beneficiary organizations on an annual basis.

All of our payments to beneficiary organizations and our operating costs must be covered through withdrawals from the fund assets. We are also obligated to grow the assets with inflation. These two objectives are woven together and cannot be treated in isolation. Payments out of the Trust capital must not reduce our ability to increase the assets at the same rate as inflation. We need a capital base to make income, and without that base the fund will be eroded and then in turn less income will be available to us and this will mean lower distributions to beneficiaries. Preservation of that capital base in real terms is our ultimate objective because without it the ability of the fund to help all those future generations will be compromised.

We must plan our investment strategy, our asset allocation, and our choice of available investment products to ensure that there is enough cash flow to fund our obligations to our beneficiary organizations and to pay our operating expenses within an acceptable range of market timing risks. We have to consider taxable treatments of investment alternatives as we must balance the types of income being generated by trust assets. The Trust will not be able to grow with inflation if its income was purely interest and dividends since the tax and trust deed mechanics flow one hundred percent of these income types out to beneficiaries. We must generate gains in market values of the assets we invest in.

In addition to income type differentiation, we also have determined that we wish to protect the Trust from market swings as much as possible. We will inevitably ride the roller coaster that is the investment markets but we hope to make the ups and downs a little less hair-raising and thereby somewhat smooth the stream of cash flows we provide to our beneficiary organizations. We prefer consistent stable returns that add up over time rather than big wins followed by big losses which average themselves out over the long term.


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