The
Heritage Fund's fair value stood at $15.4 billion
at September 30, 2006, as reported in the Heritage
Fund 2006-07 Second Quarter Update, released
on November 15, 2006 by Finance Minister Shirley
McClellan.Throughout its 30-year history, the Fund
has generated nearly $29 billion in investment income
that has improved the quality of life in the province.
Following is a summary
of critical points in the history of the Alberta
Heritage Savings Trust Fund, from its creation in
1976 to the present.
May
19, 1976: The Alberta Heritage Savings
Trust Fund Act was given Royal Assent. When the
Alberta Heritage Savings Trust Fund Act was passed
in 1976, it set three objectives for the Heritage
Fund: to save for the future, to strengthen or diversify
the economy, and to improve the quality of life
of Albertans. In accordance with the Act, the Heritage
Fund received funds from two basic sources during
1976-77. Thirty per cent of the non-renewable resource
revenue received by the Government of Alberta from
April 1, 1976 to March 31, 1977 accrued to the Heritage
Fund. This amounted to $620 million. As well, a
special contribution of $1.5 billion of cash and
other financial assets was transferred from Alberta's
General Revenue Fund to the Heritage Fund on August
30, 1976.
1977-1982:
Between 1977 and 1982, six provinces borrowed a
total of $1.9 billion from the Heritage Fund - Manitoba,
Quebec, Newfoundland, New Brunswick, Nova Scotia
and Prince Edward Island. These loans proved to
be beneficial to both Alberta and to those provinces
that were loaned the money. Those borrowing provinces
benefited by using Alberta's credit rating, which
is much lower than they would have paid using their
own credit rating. Even with Alberta's credit rating,
Alberta secured the loans at a very high interest
rate - an average of 12.5 per cent. And it strengthened
interprovincial bond issues.
Late
1980s: Some money from the Heritage
Fund was used for capital projects, which helped
improve Albertans' quality of life by developing
parks, enhancing libraries, and maintaining our
forests. These projects were also used to diversify
the economy and meet the needs of a growing population.
Some of these projects include Alberta Heritage
Foundation for Medical Research, Alberta Heritage
Scholarship Fund, Alberta Children's Provincial
General Hospital (Calgary), Walter C. Mackenzie
Health Services Centre (Edmonton), University of
Alberta Clinical Research Building, Pine Ridge Reforestation
Nursery Enhancement, Alberta Family Life and Substance
Abuse Foundation, renewable energy research, and
applied cancer research. These projects have been
paid for and benefit Albertans today.
1987:
In 1987 the transfer of natural resource royalty
revenues to the Fund were stopped.
1995:
The government asked Albertans about the future
of the Heritage Fund in a survey called, Can
we interest you in an $11 billion decision?
Of the over 50,000 responses, Albertans said to
keep the Fund for future generations and focus on
generating better returns on long-term investments.
1996:
The Alberta Heritage Savings Trust Fund Act was
amended to reflect the changes Albertans asked for
in the survey results.
1997:
Following the results from the 1995 survey, the
Heritage Fund was restructured. The Fund can no
longer be used by government for direct economic
development or social investment purposes. A new
business plan was implemented, with a plan to increase
long-term investments. And a new Legislative Standing
Committee operating at arms length from the government
was put in place to review and approve the business
plan and ensure that the objectives and goals of
the Fund are met.
Fall 1998:
The government surveyed Albertans about their fiscal
priorities in the "Talk it up. Talk it out."
survey. Albertans gave increasing savings in the
Heritage Fund an importance rating of 19.2 per cent,
behind eliminating the debt, reducing taxes and
increasing spending in priority areas.
Fall
2000: The government surveyed Albertans
on their fiscal priorities after the debt is eliminated
in the "It's Your Money" survey.
Albertans indicated that in allocating the additional
savings from not having to pay interest costs, 34
per cent support allocating those savings to a budgeted
savings plan, like the Heritage Fund. Tax reductions
and increased program spending were the top choices.
In terms of options for use of one-time unexpected
revenue, for example from high oil and gas prices,
52 per cent of respondents support saving money
for the future, just behind one-time tax rebates
at 57 per cent and ahead of one-time spending at
29 per cent.
December 2000:
All of the loans made to provinces from 1977 to
1982 have been paid back on time and without any
missed payments. The only project loans left on
the Heritage Fund books are Vencap and Ridley Grain
Ltd. for a total of $98.8 million, which represents
0.8% percent of the Heritage Fund's total portfolio.
2001: May 19, 2001 marked the 25th
anniversary of the Heritage Fund.
Fall 2001 - Spring
2002: The Heritage Fund was an important
part of Alberta Future Summit 2002 discussions.
June 2002:
Strategies and ideas for action from the Future
Summit were presented to government. Many ideas
about the mandate of the Heritage Fund, and indeed
about the province, have been discussed through
the Summit. Government is studying the strategies
and ideas for action brought forward through the
Summit and a full response to the Report to Government
will be forthcoming in Fall 2002. Those strategies
that can be implemented in the near term will be
incorporated into 2003-06 business plans.
The Heritage
Fund 2002 Annual Report was released on June
24, 2002. The Heritage Fund performed well
despite turbulence in equity markets. The
Heritage Fund increased in fair value for the fiscal
year ending March 31, 2002 to $12.4 billion, a net
increase of $290 million over the previous year.
August
2002: The 2002
1st Quarter Update showed that as of June 30,
2002, the fair value of the Fund was $11.8 billion.
As part of its business plan, and through initiatives
such as the Alberta Future Summit 2002 and the Financial
Management Commission, Alberta Revenue's review
of the province's savings policies, including the
role of the Heritage Savings Trust Fund, remains
ongoing.
November 2002:
The 2002
2nd Quarter Update was released on November
20, 2002. As of September 30, 2002 the fair value
of the Fund was $11.1 billion, down from $11.8 billion
at the end of June. The Fund recorded a net loss
of $576 million this quarter and $660 million over
the six months ended September 30, 2002. Losses
from declining world stock markets, primarily in
the information technology and telecommunication
services sectors, contributed to the loss. Despite
second quarter losses, there are signs the Heritage
Fund's rough ride could soon be over, with analysts
forecasting a recovery in world equity markets.
The investment strategy of the Heritage Fund is
based on a long-term objective and a diversified
portfolio. Fifty per cent of the fund's portfolio
is in equities with the remaining 50 per cent in
bonds, real estate, mortgages, private equities
and absolute return strategies.
February
2003: The Alberta Heritage Savings Trust
Fund made a strong recovery in the third quarter
of this fiscal year, showing an increase in fair
value of $522 million, as reported in the 2002
3rd Quarter Update, released on February 26,
2003. As of December 31, 2002 the fair value of
the Heritage Fund is $11.6 billion, up 4.5 per cent
from $11.1 billion at September 30, 2002. For the
year to date, losses from equity investments of
$901 million were partially offset by income from
bonds, notes and short term paper totaling $215
million and real estate income of $35 million. A
net loss of $578 million is still forecast for the
fiscal year ending March 31, 2003. This is an improvement
from the second quarter forecast of $627 million.
March 2003:
Results
from the Looking Forward: Planning for the Future
with the Alberta Heritage Savings Trust Fund
survey released by the Honourable Greg Melchin
confirm Albertans want a strong, healthy Heritage
Fund that is used primarily for savings. The survey
ran from October 28 to November 22, and was delivered
to over 1 million Alberta households. The survey
asked four questions about how Albertans feel the
Fund should be used in the future. Sixty one per
cent of Albertans feel the Fund should continue
to operate primarily as an endowment fund, compared
to 24 per cent who disagreed. More than 77,000 Albertans
completed the survey, including 12,000 responding
via the Internet. Alberta Revenue's business plan
includes a goal to develop a renewed savings policy.
These survey results, combined with recommendations
from the Future Summit, will help government achieve
that goal. Recommendations will be considered during
the 2004 budget planning process.
June 2003: The
Alberta
Heritage Savings Trust Fund 2003 Annual Report
shows that as of March 31, 2003 the Heritage Fund
closed out the year with a fair value of $11.1 billion,
a decrease of $1.3 billion from the previous year.
The Fund experienced
a net loss of $894 million this fiscal year. Over
the year, losses in equity markets were offset by
income from investments in bonds, notes, short term
paper, real estate, and absolute return strategies.
The Heritage Fund is
a key component of Alberta's fiscal plan. Investment
income is dedicated to the General Revenue Fund
to support priority spending. As the Fund experienced
a net loss, no transfers to the General Revenue
Fund were made this year. The Heritage Fund, like
other endowment and pension funds, was impacted
by large declines in the stock market throughout
the fiscal year, and in the last couple of years
global equity markets have experienced some of the
worst declines in equities since the 1930's.
Since the Fund was
created in 1976, Albertans' have benefited from
more than $25 billion that was used for capital
expenditures and programs including health care,
education, and infrastructure.
August 2003:
The province's largest savings account, the Alberta
Heritage Savings Trust Fund, is benefiting from
improved global stock markets. In
the Fund's first
quarter update for 2003-04, Revenue Minister
Greg Melchin announced the Fund's fair value has
increased by $587 million since March 31, 2003,
to $11.7 billion. Better than expected corporate
earnings and low interest rates helped strengthen
the stock market, resulting in increases to the
value of investments in the Heritage Fund.
In the First Quarter,
the long-term fixed income portfolio had an average
rate of return of 5.3 per cent and the equity portfolio
averaged a 9.8 per cent return. In determining
the asset mix of investments in the Heritage Fund,
levels of risk and the ability to provide long-term
returns to the province are taken into consideration.
As of June 30, 2003, the Fund's asset mix included
34.2 per cent in fixed income securities such as
bonds and 54.7 per cent in public equity investments.
The remaining 11.1 per cent is invested in real
estate, absolute return strategies and private equities.
The Fund earned $199
million in investment income this quarter.
This money will be transferred to the province's
General Revenue Fund, where it will support program
spending in health care, education, and infrastructure.
November 2003:
The Alberta Heritage Savings Trust Fund earned $187
million in investment income in the second
quarter of 2003-04. As of September 30, the
fair value of the Heritage Fund stood at $11.9 billion
up from $11.1 billion at March 31, 2003. Over the
past six months, the fair value of the Fund has
increased by $1.2 billion, almost entirely reversing
last year's decline of $1.3 billion. The increase
in fair value includes transfers to the General
Revenue Fund of $386 million, resulting in a net
increase of $836 million. The Fund recorded $386
million in net income for the first six months of
the 2003-04 fiscal year. For the year to date, it
earned $184 million from investments in equities,
$158 million from bonds, $21 million from real estate
and $23 million from absolute return strategies.
Overall, the Heritage Fund had a 3.7 per cent return
from investments this quarter and showed an 11 per
cent return over the past six months. Lower interest
rates and better than expected corporate profits
continue to fuel the market's recovery. The Canadian
market is up by 6.7 per cent, the US market is up
by 2.6 per cent, and the Non-North American market
is up by 7.7 per cent.
The Fund's diversified
investment portfolio has helped mitigate risk, particularly
over the last three years, and put it in a strong
position to earn higher returns with improved markets.
February
2004: Third
Quarter results show the Heritage Fund's fair
value has increased to $12.4 billion up from $11.1
billion at the beginning of the fiscal year The
Alberta Heritage Savings Trust Fund saw a total
return of $2 billion, with $703 million being transferred
to the General Revenue Fund for program spending,
since the beginning of this fiscal year. This represents
an 18 per cent increase, and results in a net increase
to the Fund's fair value of nearly $1.3 billion,
completely reversing the loss from the previous
fiscal year due to the downturn in the markets.
The Heritage
Fund, Alberta's largest endowment fund, continued
to grow for the third consecutive quarter, returning
6.3 per cent over the quarter.
Along
with the sound investment decisions of the government,
the Heritage Fund has benefited from low interest
rates, improved corporate earnings and increased
investor confidence. The consolidated forecast net
income for the end of the fiscal year is now $964
million, more than doubling the Budget forecast
of $426 million.
June 2004: On
June 29, in the 2003-04
Heritage Fund Annual Report, Revenue Minister
Greg Melchin announced that, with an increase of
$2.45 billion, the Alberta Heritage Savings Trust
Fund recorded the single largest annual fair value
return since its creation 28 years ago.
As of March 31, 2004,
the Heritage Fund closed out the year with a fair
value of $12.4 billion, compared to $11.1 billion
at the beginning of the year. In addition, the Heritage
Fund showed an overall rate of return on investment
income of 22.5 per cent, earning positive returns
from all asset classes. Of the total return of $2.45
billion, $1.13 billion was transferred to the General
Revenue Fund for program spending, resulting in
a net increase to the Heritage Fund's fair value
of nearly $1.32 billion.
There are a number
of reasons for the continuing recovery of world
stock markets, ending the declining stock values
over the past few years. Lower interest rates, improved
corporate earnings, and increased investor confidence
continued to fuel the market's recovery.
August 2004:
The Alberta Heritage Savings Trust Fund contributed
another $328 million to Alberta's General Revenue
Fund in
the first quarter of this fiscal year.
Even with slower growth in world markets this quarter,
the Fund is now forecast to earn $954 million in
investment income, up from the original budget forecast
of $647 million, as the Fund realizes gains made
last fiscal year.
At June 30, 2004, the
fair value of the Heritage Fund stood at $12.1 billion
down from $12.4 billion at the beginning of the
quarter. Over the quarter, the increase in fair
value of the Fund's investments totaling $74 million
was offset by transfers to the General Revenue Fund
of $328 million, resulting in a net decrease in
the fair value of the Fund totaling $254 million.
The Fund's fair value
will fluctuate, and after recording the largest
single rise in the Fund's history last year, it
is not surprising that growth of that magnitude
did not occur this quarter.
November 2004:
The Alberta Heritage Savings Trust Fund contributed
almost half a billion dollars to Alberta's General
Revenue Fund (GRF) in the first six months of the
fiscal year as reported in the 2004-05
Second Quarter Update. The Fund's net income
for the six months ended September 30, 2004 amounted
to $498 million.
Since March 31, 2004,
the fair value of the Fund's investments increased
by $33 million, however, this increase was offset
by transfers to the GRF resulting in a net decrease
in the Fund's overall fair value. As of September
30, the fair value of the Heritage Fund stood at
$11.9 billion down from $12.4 billion at the end
of the last fiscal year.
The second quarter
saw record oil prices and the energy sector led
all other sectors in the TSX Index, increasing by
11.2 per cent this quarter. The Canadian dollar
rose to an 11 year high affecting the value of the
Heritage Fund's U.S. equity investments when translated
into Canadian dollars, resulting in lower investment
returns.
February
2005: During the first nine months
of the fiscal year, the Alberta Heritage Savings
Trust Fund contributed nearly $850 million to Alberta’s
General Revenue Fund (GRF) as reported in the 2004-05
Third Quarter Update. Net income for the
Fund for the nine months ended December 31, 2004
amounted to $848 million.
Since March
31, 2004, the fair value of the Heritage Fund has
increased by $661 million offset by investment income
of $848, allocated to the GRF. As a result,
the Fund’s fair value now stands at $12.2
billion, down $187 million from the beginning of
the fiscal year.
While the Canadian
economy continued to grow and oil reached record
levels in the third quarter, the Canadian dollar
also rose relative to the US dollar. This
increase in the exchange rate had a negative effect
on the overall returns of US investments when converted
into Canadian dollars.
June
2005: The Heritage Fund earned
approximately $1.1 billion from its investments
during the 2004-05 fiscal year. On a fair value
basis, the Fund’s investments returned 7.7
per cent. All of the investment income was transferred
to the General Revenue Fund. Since 1976, transfers
to the General Revenue Fund have amounted to $27.6
billion and have been used for Albertans’
priorities including capital projects, health care,
education, roads and tax reductions.
At March 31, 2005,
the fair value of the Fund was $12.2 billion, as
reported in the 2004-05
Heritage Fund Annual Report, released on June
29, 2005 by Finance Minister Shirley McClellan.
August 2005:
During the first three months of the 2005-06
fiscal year, the Alberta Heritage Savings Trust
Fund contributed $264 million to Alberta’s
General Revenue Fund (GRF) as reported in the Heritage
Fund 2005-06 First Quarter Report. Net income
for the Fund for the three months ended June 30,
2005 amounted to $321 million.
At June 30, 2005, the
fair value of the Heritage Fund stood at $12.4 billion.
Since 1976, total transfers to the GRF have increased
to approximately $27.9 billion.
The Heritage Fund business
plan provides for inflation proofing of the Fund
in this year. For the 2005-06 fiscal year, an estimated
$226 million will be retained in the Fund to protect
it against inflation, with $56.5 million accrued
for the quarter ending June 30, 2005.
November 2005:
The Heritage Fund is now forecast to earn investment
income of $1.1 million in the 2005-06 fiscal year,
an increase of $444 million from the original budget
estimate of $684 million. As reported in the Heritage
Fund 2005-06 Second Quarter Report, the Fund
earned $646 million from its investments in the
first six months of the fiscal year, compared to
$498 million for the same period last year.
The fair value of
the Heritage Fund was $12.6 billion as of September
30, 2005. Since its inception in 1976, the Heritage
Fund has contributed about $28.1 billion for Albertans’
priorities such as health care, education, debt
elimination and tax reductions.
Led by the energy
sector, the Canadian stock market posted very strong
returns this quarter. Oil prices increased to record
levels. As a result of higher oil prices, the energy
sector in the S&P/TSX Index increased by 25.5
per cent over the quarter and 76.6 per cent over
one year. Overall, the S&P/TSX Index increased
by 11.6 per cent this quarter and 23.9 per cent
over the past 12 months.
February
2006:
An additional $1 billion will be deposited this
fiscal year into the Alberta Heritage Savings Trust
Fund as part of the government’s plan for
investing in the future. The cash injection is a
significant investment in the Heritage Fund, which
had a fair value of $13.6 billion on December 31,
2005, prior to this announcement.
In addition to the
$1-billion deposit, $750 million was placed in the
Heritage Fund on account of the Advanced Education
endowment, and the Fund is forecast to retain $345
million this year for inflation-proofing.
The Heritage Fund
is now forecast to earn investment income of $1.2
million in the 2005-06 fiscal year, an increase
of $528 million from the original budget estimate
of $684 million. As reported in the Heritage
Fund 2005-06 Third Quarter Report, the Fund
earned $914 million from its investments in the
first nine months of the fiscal year, compared to
$848 million for the same period last year.
March 2006:
Budget
2006 includes a $1 billion deposit from
the estimated 2006-07 fiscal year surplus, along
with a $242 million allocation to the Fund for inflation
proofing. This is on top of a $1 billion deposit,
$345 million for inflation proofing, and $750 million
for the advanced education endowment placed in the
fund during the 2005-06 fiscal year.
June 2006:
The Heritage Fund’s investment income of $1.4
billion and unrealized gains of $466 million accounted
for an investment return of 15.2 per cent during
the 2005-06 fiscal year, as detailed in the Alberta
Heritage
Savings Trust Fund 2005-06 Annual Report.
In 2005-06, the government
retained $382 million in the Heritage Fund for inflation
proofing, net of transfers to the General Revenue
Fund of $1 billion. During the year, the government
deposited $1.75 billion into the Fund, including
$750 million for the advanced education endowment.
At March 31, 2006,
the book value of the Fund was $13.4 billion, an
increase of $2.1 billion from the previous year,
and the fair value was $14.8 billion, an increase
of $2.6 billion over the last year.
August 2006: Due to a decline
in world equity markets during the first quarter,
the Heritage Fund is now forecast to earn investment
income of $827 million in the 2006-07 fiscal year,
$90 million lower than budgeted. Net income for
the Fund in the first three months ended June 30,
2006 amounted to $172 million.
At June 30, 2006,
the fair value of the Heritage Fund stood at $14.4
billion. The government has committed $1.25
billion to the Heritage Fund in 2006-07, including
$250 million for the Advanced Education endowment.
The Heritage Fund business plan provides for inflation
proofing of the Fund in this year. For the 2006-07
fiscal year, an estimated $283 million will be retained
in the Fund to protect it against inflation, with
$70.8 million accrued for the quarter ending June
30, 2006.
November 2006:
The Heritage Fund is forecast to earn investment
income of $1.15 billion in the 2006-07 fiscal year,
a $237 million increase from the Fund’s original
budgeted income. The revised forecast is due to
an improvement in world equity markets in the second
quarter and higher than expected realized capital
gains.
At
September 30, 2006, the fair value of the Heritage
Fund stood at $15.4 billion. Budget 2006
included a $1 billion deposit into the Heritage
Fund. In September, $400 million of this amount
was transferred to the Fund, along with $250 million
for the advanced education endowment.
Approximately $283
million will be retained in the Fund for inflation-proofing,
with $141.7 million accrued in the first six months
of the 2006-07 fiscal year.
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