07
Nov
12

FAQ2: 7i/7j Money

One of the frequent questions asked in the shareholder survey comments pertained to the 7i/7j money policy.  Here is an explanation of what 7j funds are and how Huna Totem Corporation handles those funds:

Questions and Answers about 7(j) funds

What is 7(j)?

Section 7(j) is a clause under the Alaska Native Claims Settlement Act that was passed 1971.  The clause addressed resource revenue sharing for Alaska Native village corporations.  The 7(i) clause pertains to the 12 regional corporations.  According to the 7(i) clause, the 12 regional corporations must share 70 percent of their net revenue from natural resources from the Alaska Native Claims Settlement Act.  This net revenue stems from surface and subsurface resources such as timber, minerals, and oil.  Sealaska receives 7(i) money from the other 11 regions.  A portion of this money is for Sealaska at-large and urban shareholders, the other portion is for village corporations, such as Huna Totem Corporation.

Once received by Sealaska the funds become 7(j) funds and it is sent out to the village corporations, such as Huna Totem Corporation.  According to the 7(j) clause, village corporations may use the funds as they deem necessary.  Whether the village corporation solely re-invests the funds or distributes the revenue to shareholders solely depends on the corporation’s situation and needs.

What is Huna Totem’s 7(j) policy?

Huna Totem Corporation does not have a 7(j) policy.  Instead, Huna Totem Corporation has adopted a dividend policy that is based on the Corporation’s net profits.  The dividend policy states that 25% of the average previous 3 years’ net income be paid to shareholders.  The reasoning behind this policy is dividends will be paid solely from the success of the corporation.  Historically, HTC has paid out 7(j) funds and other dividends when the corporation was in need of those funds for operations.  In those instances, money was borrowed to sustain the corporation.  Borrowing money to pay shareholder dividends ultimately costs the corporation and its shareholders more money on interest for those borrowed funds in the future.  Future profits go to paying back debt and not to shareholders via dividends.  Instead, Huna Totem Corporation has committed to a policy that will allow for the maximum amount distributed to shareholders while maintaining stability and sustainability.

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