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DIVERSIFYING OUR FUTURE

The Pedro Bay Corporation Board of Directors is asking shareholders to vote at the 2015 Annual Meeting of Shareholders on December 5, 2015 about the establishment of a settlement trust fund.

As we look for ways to diversify our company, we believe it is important to diversify our assets to provide meaningful long-term benefits for both this generation and those that come after us. After a thorough evaluation, the PBC Board determined that establishing the Settlement Trust offers the best way of providing long-term cash distributions to shareholders and future shareholders. The Settlement Trust provides certain protections and benefits that PBC cannot provide directly. It is one avenue of diversifying funds for the growth of assets and increase long-term shareholder benefit.

WHAT IS A SETTLEMENT TRUST?

Congress amended the Alaska Native Claims Settlement Act (ANCSA) in 1988 as a way to allow Native corporations to provide ongoing benefits to shareholders and their families in perpetuity. The Trust would be organized under State law in accordance with ANCSA.

Many village and regional corporations have successfully established settlement trusts. A settlement trust is a way to provide long-term financial benefits for shareholders and leaving a financial legacy for descendants.

WHY USE A SETTLEMENT TRUST?

In 1988, Congress amended the Alaska Native Claims Settlement Act (ANCSA) to allow Native corporations to put assets into a settlement trust to protect their assets on a long-term basis for the shareholders. A settlement trust is a special type of legal entity that is only available to Alaska Native corporations that allows Alaska Native corporations to transfer assets to the entity that will then be protected from legal risks of the business operations and enjoy special tax advantages.

WHY ESTABLISH A TRUST IN THE FIRST PLACE?

After careful review, the PBC Board has determined that establishing a settlement trust offers the best way of providing long-term cash distributions to shareholders. This is because a settlement trust provides certain protections and benefits that PBC cannot provide directly. It is one avenue of diversifying funds for growing corporate assets and increasing long-term shareholder benefit.

WHERE WILL THE FUNDS FOR THE TRUST COME FROM?

The PBC Board of Directors will, from time to time, transfer assets from PBC to the Trust. It is expected the assets to be transferred will be from cash, publicly-traded stocks and bonds, investments, and other income-producing assets. Once these assets are transferred to the Trust they will be invested and managed for the sole purpose of generating long-term income for PBC shareholders. In this way, the Trust will become a type of “permanent fund” or savings account for PBC shareholders, dedicated to making cash distributions to PBC shareholders and shareholders of the future.

THE LEGAL BENEFITS OF THE TRUST

What the Settlement Trust will allow the corporation to do is permanently dedicate corporate funds and assets to the generation of income for distribution to the shareholders. Once money or property is transferred to the Settlement Trust, it may only be invested and managed to produce long term income; it may never be used for business operations; it will be able to grow more quickly than if left in PBC ownership because of favorable federal tax rates and tax treatment; and, the income it generates may only be used for making cash distributions to the shareholders.

Under current tax law, earnings in a Settlement Trust are taxed at about one-third of the tax rate that PBC pays on its profits. Unlike dividends from PBC, distributions of those earnings from the Trust to the shareholder will not be subject to federal income taxes.

This is a great opportunity for the shareholders to give the Board of Directors the means of providing for steady distributions to current shareholders and to future generations of shareholders to come.

WHEN WILL DISTRIBUTIONS BEGIN AND HOW BIG WILL THEY BE?

The Trust will pay out dividends on a schedule determined by the Trust Board. They will begin small and are expected to grow over time. The payout will be in proportion to the amount of shares one has. The goal is to establish a fund that will continue to have benefits that will continue for your descendants.

I HAVE MORE QUESTIONS ON THE TRUST VOTE – WHO DO I ASK?

The PBC Board appreciates your questions and comments on this issue. Please contact Rayn Aaberg at (907) 277-1599 or email This email address is being protected from spambots. You need JavaScript enabled to view it.

ANNUAL MEETING AND TRUST VOTE SET FOR DECEMBER 5, 2015


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