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Deed Concerning the Tokelau International Trust Fund [2004] PITSE 3 (10 November 2004)

DEED CONCERNING THE TOKELAU INTERNATIONAL TRUST FUND

(Wellington, 10 November 2004)

ENTRY INTO FORCE: 10 NOVEMBER 2004

WHEREAS

Tokelau is one of the world’s smallest non-self-governing territories and has few financial reserves and minimal revenue generating capacity;

In order to progress towards full self-government and its future with confidence, Tokelau needs assistance to overcome special difficulties of remoteness and lack of natural resources;

The ability to make long-term provision for intergenerational wellbeing and support is of key importance to the people of Tokelau;

The Government of New Zealand and the Government of Tokelau (the General Fono in the exercise of its executive powers) wish to contribute to the long-term financial viability of Tokelau and to improve the quality of life of the people living in the villages of Tokelau, by providing the Government of Tokelau with an additional source of revenue for recurrent budgetary and development expenditure;

AND WHEREAS

In 2000 the Governments of New Zealand and Tokelau established a trust fund for Tokelau and vested their initial contributions in the Administrator of Tokelau and the Ulu o Tokelau as trustees of the fund;

The resources of the fund are the sums invested with the Bank of New Zealand in account 02-0500-0675848-081;

The Governments of New Zealand and Tokelau contribute to the fund from time to time, and wish to promote the fund to other donors;

At its February 2003 session, the General Fono made the Tokelau Trust Fund Rules 2003, providing for the fund in Tokelau law in anticipation of a Deed for the fund;

At its January 2004 session, the General Fono endorsed a proposal by the Administrator to formalise the rules of the fund by Deed under New Zealand law;

The fund may, at such future time as Tokelau has the capacity to enter into treaties on its own behalf, be governed by treaty;

THE GOVERNMENTS OF NEW ZEALAND AND TOKELAU AGREE AS FOLLOWS:

PART I: THE TOKELAU INTERNATIONAL TRUST FUND

Clause 1

The Tokelau International Trust Fund

The trust fund established by agreement of the Governments of New Zealand and Tokelau (“the Parties”) in 2000 shall be known as the Tokelau International Trust Fund (“the Fund”), and shall be governed by this Deed.

Clause 2

Purpose of the Fund

The purpose of the Fund is to contribute to the long-term financial viability of Tokelau and to improve the quality of life of the people living in the villages of Tokelau, by providing the Government of Tokelau with an additional source of revenue for recurrent budgetary and development expenditure, and in particular to:

(i) Assist the Government of Tokelau to achieve greater financial autonomy in the management of its budget;

(ii) Enable the Government of Tokelau to maintain and if possible improve existing levels of social infrastructure and services;

(iii) Enhance the capacity of the Government of Tokelau to receive and effectively utilise external assistance;

(iv) Enable the Government of Tokelau to meet long-term maintenance and operating costs of social and economic infrastructure and services; and

(v) Assist the Government of Tokelau to develop the economy of Tokelau.

PART II: ADMINISTRATION

Clause 3

Board

1. There shall be a Board of Trustees of the Fund.

2. The Trustees shall be:

(i) One Trustee jointly appointed by the Parties, who shall be the Chairperson of the Board;

(ii) One Trustee appointed by the Government of New Zealand;

(iii) One Trustee appointed by the Government of Tokelau.

3. The Parties or a Party shall appoint an alternate Trustee to participate in any meeting of the Board when a substantive Trustee appointed by the Parties or that Party is for any reason temporarily unable to attend.

4. The functions of the Board shall include:

(i) The operation, supervision, and management of the Fund; and

(ii) The investment and distribution of resources of the Fund.

5. Trustees shall serve as such without payment of remuneration.
6. Trustees' expenses shall be paid by the appointing Party, and in the case of the Chairperson shall be paid by the Parties in equal shares.

7. A Trustee shall not be liable for the consequence of any act or omission or for any loss unless the consequence or loss is attributable to that Trustee’s dishonesty or to the wilful commission by that Trustee of a breach of trust. A Trustee is not bound to take any proceedings against a co-Trustee for any breach or alleged breach of trust.

8. The Board shall meet in person or by teleconference as necessary and at least twice a year, and reasonable notice shall be given of meetings.

9. Except where otherwise provided in this Deed, questions before the Board shall be decided by a majority of votes of the Trustees, or alternates of absent Trustees.

10. The Board shall otherwise establish its own rules of procedure.

Clause 4

Secretariat

1. The Board shall, in consultation with the Government of Tokelau, establish a Fund Secretariat, which shall consist of a Secretary/Treasurer and such other officers as the Board thinks fit.

2. The Secretariat shall have such secretarial functions as the Board may determine from time to time.

Clause 5

Advisory Committee

1. The Board may appoint an Advisory Committee to advise the Government of Tokelau on the progress of the economy of Tokelau and on the social and economic effects of the Fund on Tokelau.

2. The Advisory Committee shall submit to the Government of Tokelau and to the Board an interim report after the first six months and, thereafter, an annual report on the progress of the economy of Tokelau and on the social and economic effects of the Fund on Tokelau.

3. The Advisory Committee shall, in the performance of its functions, consider and advise on Tokelau’s national budgets and estimates, annual accounts, and finances, having regard, amongst other things, to the size of the Fund’s capital and the returns available from it.

4. The Advisory Committee shall consist of two members, or such other number as may be decided by the Board. The members of the Advisory Committee shall be appointed by unanimous decision of the Board for such term and on such conditions as the Board may decide, and shall be paid such remuneration and expenses out of the Fund as the Board may approve.

PART III: RESOURCES OF THE FUND

Clause 6

Resources

1. The resources of the Fund shall consist of:

(i) The amounts settled by the Parties as their initial contributions to the Fund;

(ii) Additional contributions under Clause 7; and

(iii) Returns derived from the operations of or money otherwise accruing to the Fund.

2. The resources of the Fund shall be held in trust and administered by the Board and used only for the purpose of the Fund and in accordance with this Deed.

Clause 7

Additional Contributions

1. The Board may accept additional contributions from the Parties and other contributors, in the form of direct cash grants in freely convertible currencies.

2. The Board may refuse a contribution if it considers that it would not be in the interests of the Fund or of Tokelau to accept it.

3. Contributions shall be made for the purpose of the Fund without further restriction as to use, and shall not be refunded to contributors.

PART IV: OPERATION OF THE FUND

Clause 8

Administrative Budget

The Board shall approve an annual administrative budget by 1 July each year.

Clause 9

Financial Year

1. The financial year of the Fund shall end on 30 June in each year.

2. The first financial year of the Fund shall be deemed to end on 30 June 2005.

Clause 10

Investment

1. In the first to fifth financial years of the Fund, the Board shall invest all the resources of the Fund in term deposits in New Zealand registered banks or New Zealand Government bonds, or both.

2. Thereafter, the Board may by unanimous vote decide to invest resources of the Fund other than in term deposits in New Zealand registered banks or New Zealand Government bonds.

3. The Board shall not borrow, and shall not mortgage, charge, or pledge any of the assets of the Fund.

Clause 11
Fund Managers and Fund Monitor

1. After the fifth financial year of the Fund, the Board shall, if it decides to invest the resources of the Fund other than in term deposits in New Zealand registered banks or New Zealand Government bonds, appoint one or more Fund Managers and a Fund Monitor on such terms and conditions as it determines.

2. The Board shall establish investment guidelines for the Fund Managers, which shall provide among other things that the resources of the Fund are to be invested in a prudent manner, for the purpose of the Fund, and in accordance with this Deed.

3. The Board may delegate to the Fund Managers responsibility for the day-to-day administration of the Fund.

4. The Fund Managers shall provide such reports on the value and disposition of the resources of the Fund, such reviews of its performance, and such advice on it as are required by the Board.

5. The remuneration and expenses of the Fund Managers and the Fund Monitor in carrying out their duties under this Deed shall be met from the Fund.

6. The Fund Monitor shall regularly review the investment performance of Fund Managers against that of other fund managers of like funds.

7. The Fund Monitor shall report to the Board:

(i) At least once a year within two weeks of the end of the financial year;

(ii) As requested by the Board or the Fund Secretariat; and

(iii) At other times as deemed appropriate by the Fund Monitor.

8. All reports of the Fund Monitor shall be made immediately available to the Board.

Clause 12

Re-Investment and Distribution Policy

1. The Board shall establish, and revise from time to time, a re-investment and distribution policy.

2. The Board shall balance the provision of immediate additional revenue for recurrent expenditure against the need to maintain, so far as possible, the value of the Fund’s capital at not less than the real value of the initial capital of the Fund as increased by the real value of additional contributions.

3. For the purposes of this Deed:

“re-investment” means the process by which Fund returns, whether in the form of income or capital appreciation, are added to and become part of the capital of the Fund;

“Fund returns” in any financial year means the returns accruing to the Fund in that year by way of income generated from the Fund resources and the capital appreciation of those resources;

“real value” shall be calculated by adjusting the value of contributions when made to current prices in line with movements in the New Zealand Consumer Price Index.

Clause 13

Re-Investment and Distribution

1. At the end of each financial year, the resources of the Fund (after the administration and other costs of the Fund have been met) shall, in accordance with this Clause, be available for re-investment and for distribution to the Government of Tokelau during the following financial year as additional revenue for financing recurrent budgetary and development expenditure.

2. The Board shall ensure that an amount of the Fund returns in each financial year is re-invested at the end of that financial year as capital of the Fund, such amount being the amount necessary to maintain the opening balance of the Fund’s capital for the following financial year at the real value of the initial capital of the Fund as increased by the real value of additional contributions.

3. To enable the Government of Tokelau to prepare its national budget and estimates for the following financial year, the Board shall inform the Government of Tokelau by 30 April each year of the forecast returns available for distribution in the following financial year.

4. For the purposes of this Deed, “returns available for distribution” means the amount remaining from the Fund returns after the administration and other costs of the Fund have been met, and after re-investment in accordance with paragraph 2.

5. Subject to paragraphs 7 and 8, the Board shall distribute to the Government of Tokelau each year the returns available for distribution, or such lesser amount as the Government of Tokelau may specify.

6. Returns available for distribution but not distributed under paragraph 5 shall be re-invested and shall be deemed to be additional contributions of the Government of Tokelau in accordance with Clause 7.

7. There shall be no distribution from the Fund to the Government of Tokelau before the end of the fifth financial year of the Fund.

8. There shall be no distribution from the Fund to the Government of Tokelau in the sixth to tenth financial years of the Fund unless the Board, at the special request of the Government of Tokelau, otherwise decides.

PART V: UNDERTAKINGS OF TOKELAU

Clause 14

Undertakings of Tokelau

1. The Government of Tokelau shall treat all money received by it from the Fund as public money of Tokelau and as such subject to appropriation and scrutiny by the General Fono.

2. The Government of Tokelau shall on request provide full information and documents to the Board and any Advisory Committee of and in relation to Tokelau’s national budgets and estimates, the annual accounts, the report of the Auditor (including any information or documents which the Auditor would be entitled to demand), and financial, social, and economic data held by the Government of Tokelau.
3. The Government of Tokelau shall ensure that the financial statements of and reports relating to the Fund submitted to Tokelau under Clause 17 are promptly laid before the General Fono.

4. The Government of Tokelau shall use its best endeavours to make contributions to the Fund, in accordance with Clause 7, from its revenues from whatever source.

5. The Government of Tokelau shall ensure that legislation is enacted and maintained to give effect to its obligations under paragraphs 1 to 3.

PART VI: FINANCIAL STATEMENTS AND AUDIT

Clause 15

Financial Statements

1. The Board and, if appointed, the Fund Managers shall keep all proper books and records of account of the assets, property, liabilities, income and expenditure, and transactions of the Fund.

2. The Board and, if appointed, the Fund Managers shall prepare annual financial statements in accordance with generally accepted accounting practice, consisting at a minimum of a profit and loss account, statement of movement in equity, balance sheet, statement of commitments, statement of contingent liabilities, and statement of accounting policies, and shall produce these promptly to facilitate audit.

Clause 16

Audit

1. At the end of each financial year the financial statements of the Fund shall be audited by an Auditor who has no connection with any Fund Manager of the Fund and who is appointed by the Board.

2. The Auditor shall be satisfied that the financial statements of the Fund have been properly prepared in accordance with internationally recognised standards of generally accepted accounting practice and shall either:

(i) Report that:

(I) The financial statements have been properly prepared in accordance with the books and records of the Fund; and

(II) The books and records of the Fund have been properly kept and contain information adequate for the purposes of the audit; and

(III) The financial statements of the Fund give a true and fair view of the Fund’s operations and financial position; and

(IV) The financial affairs of the Fund have been properly conducted in accordance with this Deed; or

(ii) Notify the Board that the report cannot be completed as provided in subparagraph (i), and give the reasons for that.

3. The Auditor shall include in the audit report information on the performance of any Fund Managers in the investment of the Fund in accordance with the guidelines laid down by the Board, with particular comparative reference to the performance of managers of other funds of a similar size and nature.

4. The Auditor shall submit the report to the Board.

5. The cost of the audit shall be met from the Fund.

Clause 17

Annual Reports

Within six months of the end of the financial year the Board shall publish and shall submit to each Party:

(i) An Annual Report on the activities and management of the Fund, including the annual report of any Advisory Committee under paragraph 2 of Clause 5;

(ii) The financial statements of the Fund for that year audited in accordance with Clause 16; and

(iii) The report of the Auditor under Clause 16.

PART VII: GOVERNING OF FUND BY TREATY, TERMINATION, AND VESTING

Clause 18

Governing of Fund by Treaty

1. At such time as Tokelau has the capacity to enter into treaties on its own behalf the Parties shall, at the request of the Government of Tokelau and subject to their respective treaty-making procedures, take the steps necessary for the Fund to be governed by treaty.

2. The treaty shall be materially identical to this Deed, with such modifications as the Parties may jointly agree.

3. Upon the entry into force of the treaty, the Trustees shall vest the assets of the Fund in the Fund as a corporation, all rights and obligations of the Trustees shall continue in accordance with their terms as rights and obligations of the Fund, this Deed shall terminate, and the Fund shall become governed by the treaty.

Clause 19

Termination and Distribution of Assets

1. The Parties may, at any time before the entry into force of a treaty under Clause 18, by unanimous decision terminate the operations of the Fund.

2. Upon termination of operations the Board shall immediately cease all activities of the Fund, except those incidental to the orderly realisation and conservation of its assets and the settlement of its obligations.

3. On final settlement of the obligations of the Fund and the distribution of its assets the Fund shall terminate. Until then the Fund shall remain in existence and all rights and obligations of the Board and the Parties consistent with the termination of the Fund’s operations shall continue unimpaired.

4. (i) No distribution of assets shall be made until all liabilities to creditors have been discharged.
   

(ii) Subsequently, the assets of the Fund shall be distributed to the Government of Tokelau.

Clause 20

Vesting

The assets of the Fund shall vest in the Government of Tokelau on 1 January 2080, if this Deed or the Fund has not terminated prior to that date.

PART VIII: MISCELLANEOUS PROVISIONS

Clause 21

Tax Exemption

The Parties shall use their best endeavours to ensure that contributions to the Fund, the property and assets of the Fund, and distributions from the Fund are exempt from all direct taxation.

Clause 22

Review and Evaluation

1. The Parties shall periodically, at such intervals as they deem appropriate, review the effectiveness of the Fund in accomplishing its purpose.

2. The first review shall take place not later than three years after the date of execution of this Deed.

Clause 23

Amendment

This Deed may be amended from time to time by deed executed by the Parties.

Clause 24

Arbitration

Any dispute between the Parties relating to the Fund (whether during the life of the Fund or on the termination of its operations) which cannot be resolved through consultation may, at the option of the Parties, be submitted to arbitration by an arbitrator, to be appointed by the Parties or, if they are unable to agree on an arbitrator within 30 days, by the Chief Justice of New Zealand. The decision of the arbitrator shall be final and binding on the Parties.

Clause 25

Governing Law

This Deed shall be governed by the law of New Zealand.

IN WITNESS WHEREOF this Deed has been executed at Wellington this 10th day of November 2004.

ON BEHALF OF HER MAJESTY
THE QUEEN IN RIGHT OF
NEW ZEALAND:

Philip Bruce Goff
Minister of Foreign Affairs and Trade

ON BEHALF OF THE
GOVERNMENT OF TOKELAU:

Pio Tetimuatoga Tuia Iosefo
Acting Ulu o Tokelau

IN THE PRESENCE OF:

Neil Douglas Walter
Administrator of Tokelau