Commencement and Application

(1) This Act shall come into force on such date as the Minister appoints by notice published in the Gazette. (2) A person who complies with an obligation under this Act does not, solely as a consequence of complying with that obligation, breach any other obligation whether under law, contract or otherwise. 48 Management Fund SCHEDULE 1 PETROLEUM REVENUE MANAGEMENT FUND ACT Custody Bank Agreement (Section 4) 1. The Custody Bank Agreement shall deal with, inter alia, (a) the manner of proof and certification of transfer of the Annual Transfer Amount from the Permanent Restricted Account to the Flexible Transfer Account; (b) the deadline for the transfer of the Annual Transfer Amount to the Flexible Transfer Account and other transactions with and between the Accounts; (c) the authorization for and manner of proof of certification of investment transactions; (d) the manner of proof and certification of returns on investments into the Permanent Restricted Account; (e) the manner of proof and certification of payment of Petroleum Revenues into the Permanent Restricted Account by the persons liable to pay such moneys; (f) the provision of quarterly statements of accounts by the Custody Bank. 2. The Custody Bank Agreement shall provide, inter alia, Petroleum Revenue Management Fund 49 (a) that transfers from the Permanent Restricted Account shall only be effected in accordance with this Act; (b) that the provisions of this Act shall be an integral part of the agreement; (c) that the Permanent Restricted Account shall be maintained and dealt with by the Custody Bank solely in accordance with the provisions of this Act and the agreement; (d) that any dealing by the Custody Bank contrary to subparagraph (c) of this Paragraph shall be null and void and render the Custody Bank liable for the same provided the Custody Bank has knowledge of the circumstances contrary to the provisions of this Act which make such dealings invalid; (e) that the Bank may only resign its mandate on not less than 12 months written notice to the Central Bank (or such lesser period as the Central Bank shall decide); (f) that the Central Bank may terminate the Custody Bank’s mandate on or without notice; (g) that if the Custody Bank’s mandate is terminated, it will deal with the moneys and investments in the Accounts in such manner as the Central Bank shall instruct. 3. The Custody Bank Agreement shall include the acknowledgement by the Custody Bank that the Fund is held in trust as mentioned in Section 3 of this Act and that the Custody Bank does not, and shall not, have any claim on the Accounts Petroleum Revenue 50 Management Fund and the moneys and investments therein, and further that the Custody Bank shall include a similar acknowledgement in regard to all persons holding investments for the Fund. Petroleum Revenue Management Fund 51 SCHEDULE 2 PETROLEUM REVENUE MANAGEMENT FUND ACT Petroleum Revenues (Section 5) 1. Petroleum Revenues are, (a) all monies in whatever currency payable to the Government or any local authority by a Contractor pursuant to a Contract, or by law or otherwise, whether taxes, duties, excises, fees, charges, or otherwise and however styled and which relate to, or result from, directly or indirectly, Petroleum Operations, including, (i) royalties less any portion thereof payable to the local community as may be prescribed by law; (ii) taxes on income, profit or gain, including resource rent and additional profits taxes; (iii) monies and other consideration from the sale or other disposition of the Government’s production share of petroleum; (iv) gross revenues due to the Government for taking a working interest in the Contractor’s Petroleum Operations less all applicable exploration and operating expenses assumed by the Government and less any financial Petroleum Revenue 52 Management Fund charges payable by the Government for a Contractor’s loan to finance the acquisition of the working interest; (v) signature, production and other bonuses; (vi) interest and other moneys (but not criminal penalties) payable by a person as a consequence of his failure duly to pay a Petroleum Revenue; and (vii) such other monies as the Minister may by Order published in the Gazette prescribe, subject to negative resolution; (b) all proceeds of any sale of any portion of a working interest that the Government may have taken as described in subparagraph (a) (iv); and (c) all interest, dividends and other returns on the investments of the Fund less, as may be authorized by the Central Bank, Custody Bank fees and charges and any applicable investment management or administrative fees. 2. Any royalty or Government production share of petroleum referred to in paragraph 1 and that is payable in kind shall be delivered to it or otherwise dealt with as required by law or contract, provided that such royalty or share in kind, and the Government’s rights thereto, may only be disposed of by way of sale at market price for money, and, on and from the date mentioned in section 5(2) of this Act, Petroleum Revenue Management Fund 53 (a) if the royalty or Government production share is marketed by the Contractor, then the Contractor is obliged within thirty days of receiving the proceeds from the sale to deposit such Petroleum Revenues directly in the Permanent Restricted Account; and (b) if the royalty or Government production share is marketed by the Government itself, then the Government shall, within thirty days of receiving the proceeds from the sale, deposit the Petroleum Revenues in the Permanent Restricted Account. 3. Where the Government carries out Petroleum Operations directly through a company in which it invests (and if with others, on arm’s length commercial terms) and which company enters into a contract on arm’s length commercial terms with the Government, then a dividend or other distribution paid to the Government by such a company is not a Petroleum Revenue unless the Minister prescribes otherwise by an Order made under item paragraph 1(a)(vii). 4. Paragraph 1 does not apply to, (a) that portion of royalty payable to the owner of private land under section 31(4) of the Petroleum Act; (b) General Sales Tax or any Value Added Tax; (c) any direct tax, duty, excise, fee, charge or other payment not specifically mentioned in sub- paragraph (a) of paragraph 1 or in an Order made by the Minister under item (vii) of that paragraph and generally payable by Petroleum Revenue 54 Management Fund persons or businesses in Belize, including those in respect of motor vehicles and other forms of transportation, fees for service provided by Government or an agency thereof (including postage), business rates, property taxes and those levied by local authorities; (d) subject to item (vii) of paragraph 1(a), application, administrative, licence and public service fees; (e) subject to item (vii) paragraph 1(a), surface rentals; (f) custom duties; (g) withholding taxes that are reimbursable to the taxpayer. Petroleum Revenue Management Fund 55 SCHEDULE 3 PETROLEUM REVENUE MANAGEMENT FUND ACT Investment Policy (Section 9) 1. The Investment Strategy shall have the following policy principles, (a) sufficient liquidity to ensure availability of cash for the Annual Transfer Amount; (b) optimizing returns, subject to specified levels of acceptable risk for the investment horizon; (c) transparent, modern and diversified management of the financial assets that are part of the investment portfolio; (d) limiting investment to only low-risk investments for a specified minimum number of initial years of the establishment of the Fund; and, (e) risk diversification by ensuring that, as practically possible, a variety of different financial assets are held in the Fund and that a limit is set for the maximum investment that may be made in any single financial asset. 2. Subject to paragraph 1 of this Schedule, the Investment Strategy and Policy shall include, as a minimum, (a) the types of permitted investments, including categories of assets and instrument; Petroleum Revenue 56 Management Fund (b) classifications and ratings of permitted investments, based on ratings from at least two internationally recognised credit rating agencies; (c) rules relating to asset diversification including having a portfolio of assets in different sectors and issuers, and, in the case of fixed-income assets, horizon and maturity; (d) the acceptable level of volatility during the term of the investment; (e) the acceptable level of exposure to foreign exchange risk, especially for investment is denominated in currencies other than United States Dollars; (f) the rules established to ensure sufficient liquidity for the Annual Transfer requirement. 3. Without prejudice to subsection (4) of section 9 of this Act, and subject to paragraph 4 of this Schedule, investments shall be held only in the form of the following instruments, (a) cash bank deposits with an Approved Bank; (b) negotiable direct obligations issued by an Approved Foreign Government provided that the full faith and credit of such Approved Foreign Government is pledged in support thereof; (c) securities issued or fully and directly unconditionally guaranteed or insured by any Approved Foreign Government, provided that the full faith and credit of such Approved Petroleum Revenue Management Fund 57 Foreign Government is pledged in support thereof; (d) negotiable direct obligations issued by, and securities issued or fully and directly unconditionally guaranteed or insured by, (i) any Approved Multilateral Organisation; or (ii) a government agency of any country that is a member of the Organisation for Economic Co-operation and Development (OECD) and unconditionally guaranteed by the national government of such country, Provided the full faith and credit of such Approved Multilateral Organisation and the national government of the OECD country is pledged in support thereof, and provided further that such obligations and securities are rated top of higher, (e) unrestricted United States of America and LIBOR certificates of deposit and time deposits; (f) bankers acceptances, and floating rate certificates of deposit issued by or unconditionally guaranteed or insured by an Approved Bank; and (g) investments in money market funds, the assets of which shall comprise securities of the type described in subparagraphs (a) to (e) above, regardless of the maturity date of such assets. Petroleum Revenue 58 Management Fund 4. After at least three (3) years from the establishment of the Fund and after the total value of the moneys and investments in the Permanent Restricted Account reaches a threshold level approved by the Investment Committee, then the Investment Committee, in elaborating the investment strategy, may allow a proportion of those moneys and investments to be invested in publicly traded equity assets of good quality and of reasonable volatility or in investment funds containing equity assets of similar quality and volatility. 5. Notwithstanding the provisions of paragraph 4 of this Schedule, once a threshold level prescribed in that paragraph has been reached, the equity investment level may be maintained even if the total value of the moneys and investments in the Permanent Restricted Account falls back below the threshold level that was required to make the relevant equity investment. 6. In this Schedule, “Approved Bank” means any foreign commercial bank, or its branches or agencies, in a foreign location, which is rated the highest by two internationally recognised risk analysis firms; “Approved Foreign Government” means the national government of any foreign country, which is rated the highest by two internationally recognised risk analysis firms; and “Approved Multilateral Organisation” means any reputable international organization whose membership comprises governments and other international organisations, which is rated the highest by two internationally recognised risk analysis firms. Petroleum Revenue Management Fund 59 SCHEDULE 4 PETROLEUM REVENUE MANAGEMENT FUND ACT Calculation of Sustainable Permanent Income (Section 12) 1. For any financial year, the Sustainable Permanent Income is the amount in United States Dollars given by. n 𝐒𝐏𝐈𝐭= 𝐫 × [𝐕𝐏𝐫𝐚t−1 + ∑ 𝐅𝐑t (𝟏+ 𝐢)𝒕 ] t = 0 t=0 Where: SPIt, is the Sustainable Permanent Income for year t r is the lesser of five per cent and the Long term real rate of return, being the expected annual rate of return on the Fund over the period of calculation of Sustainable Permanent Income, determined on the basis of the assets (and in the proportions) in the Fund at the date of the calculation and utilizing nominal historical rates of return for each class of asset, adjusted for inflation over the period of calculation, VPrat˗1, is the closing balance of the Permanent Restricted Account immediately prior to the start of the financial year for which the Sustainable Permanent Income is being determined, i is the discount rate used to determine the present value of each forecasted year Petroleum Revenues FR in year t and should not be lower than the expected annual rate of return on the Fund, FRt, is the future petroleum revenues, being the estimated aggregate for each year and with Petroleum Revenues for each Petroleum Revenue 60 Management Fund financial year t over the period of calculation, being determined on the basis of, (a) the estimated net realized price in United States Dollars of petroleum expected to be produced and saved in Belize, and sold in the financial year concerned; and (b) the estimated future production, being the quantities of petroleum estimated to be produced and saved in Belize, and sold in the financial year concerned. 2. The net realized price shall be an estimate of the free market selling price of petroleum in markets into which it is expected petroleum produced and saved in Belize will be sold, adjusted for quality and transportation costs. The estimate shall be made by the Inspector on the basis of the best information available to him, having made due enquiry, from, (a) reputable and published sources; (b) consultations with various international organizations such as, the International Monetary Fund, the International Energy Agency, and such other persons and organizations as he deems appropriate; (c) existing contracts for the sale of petroleum produced and saved in Belize. 3. No forecasted net realized price shall be more than the weighted average actual net realized price of petroleum produced and saved in Belize, and sold over the previous five financial years (or the lesser period over which petroleum has been produced and saved in Belize, and sold). Petroleum Revenue Management Fund 61 4. The estimated future production shall be based on existing and operating facilities immediately prior to the start of the financial year for which SPI is being determined, plus any additional field for which a development plan has been approved by the Government and a final investment decision made by the Contractor. 5. The estimated future production shall be estimated by the Inspector on the basis of the best information submitted to him by the Contractors and others he deems appropriate. 6. The Inspector shall provide to the Commissioner of Taxation, together with a fully reasoned report thereon including all information (and the source thereof) considered in the process and a discussion of the uncertainties involved, (a) the estimated future net realized price; (b) the estimated future production; (c) estimated costs and expenses to be incurred by Contractors and other relevant persons, based on the best information available to him, having made due enquiry, from Contractors and others he deems appropriate; and (d) the estimated future Royalties and Profit Sharing and any other form of Petroleum Revenues for each Contractor for which he has the responsibility to estimate and collect. 7. It is an obligation of every Contractor to provide the Inspector with the information referred to in paragraphs 5 and 6 (c) at least one month before the end of the financial year whether or not the Inspector has requested for it. Petroleum Revenue 62 Management Fund 8. Based on the information above, the Commissioner of Income Tax, shall provide his estimate of Petroleum Revenues falling under his responsibility, such as income taxes. 9. Under the responsibility of the Minister of Finance, the Sustainable Permanent Income shall be calculated by the Commissioner, the Inspector and the Central Bank. The Commissioner, the Inspector and the Central Bank should jointly provide a fully reasoned report thereon including all information (and the source thereof) considered in the process and a discussion of the uncertainties involved. Petroleum Revenue Management Fund 63 SCHEDULE 5 PETROLEUM REVENUE MANAGEMENT FUND ACT Candidates for Membership of the Independent Oversight Board (Section 19) 1. The following organizations or any replacement organization, may recommend candidates for membership of the Independent Oversight Board in accordance with Section 19 of this Act, (a) the Association of Professional Engineers of Belize; (b) the Bar Association of Belize; (c) the Belize Business Bureau; (d) the Belize Chamber of Commerce and Industry; (e) the Belize Council of Churches; (f) the Credit Union League; (g) the Institute of Chartered Accountants of Belize; (h) the Mayors’ Association of Belize; (i) the National Association of Village Councils; (j) the National Trade Union Congress of Belize. Petroleum Revenue 64 Management Fund 2. The House of Representatives shall from time to time review, and by a majority of the votes of the members thereof present and voting, amend if necessary, the list of organizations in Paragraph 1 of this Schedule to ensure the widest possible representation of Belizean society. 3. In reviewing or amending this Schedule, the House of Representatives shall always seek to ensure the widest possible representation of Belizean society.