At the Annual Meeting of shareholders on June 1, 2019, shareholders overwhelmingly approved the formation of the CIRI Settlement Trust.
Thanks to provisions in the Tax Cuts and Jobs Act of 2017, Alaska Native corporations may now establish settlement trusts to enhance the health, education and welfare of their beneficiaries and preserve the heritage and culture of Alaska Native people. A settlement trust can provide a broad range of benefits to its beneficiaries, including shareholder distributions. Other benefits may include, but would not be limited to, burial assistance, training and internships, cultural programs and other activities.
CIRI Settlement Trust Benefits
The CIRI Settlement Trust provides mutual benefit to both shareholders and the corporation, including allowing both shareholders and the corporation to take advantage of significant tax savings:
- Benefit to all shareholders: Distributions from the Trust to shareholders are expected to be tax free.
- Benefit to original Elders: CIRI Elders’ Settlement Trust funding will run out in 2019. The CIRI Board of Directors has approved providing the necessary funding to cover any shortfall through the end of the year, thereby ensuring that all eligible Elders’ receive full payments in 2019. The Board proposes to provide Elders’ benefits after 2019 through the CIRI Settlement Trust, maintaining the current level of payments and current eligibility requirements of the CIRI Elders’ Settlement Trust: original CIRI shareholders who are 65 years of age or older, own at least one share of CIRI stock and are alive on the distribution date of record would be eligible to receive $450 quarterly Elders’ payments, assuming adequate Settlement Trust funding.
- Other tax benefits: Significantly reduces the company’s current and future federal income tax liability. This means the company will have more money to fund benefits for shareholders and descendants and to reinvest and continue to grow the company.
Frequently Asked Questions
There is a lot that goes into the formation of a Settlement Trust!
You have questions. We have answers!
If the shareholders approve the CIRI Settlement Trust, the CIRI Board of Directors is proposing to maintain the current dividend policy: the total dividend payment in any given year is equal to 3.5% of total shareholders’ equity, calculated as of Dec. 31 of the prior year. Distributions from the Settlement Trust are expected to replace some or all of CIRI’s quarterly dividends, except the payments will be made as distributions from the Settlement Trust instead of directly by CIRI. In most cases, Settlement Trust distributions will be tax-free to beneficiaries.
No. Payments would be processed in the same manner as they have been (for example, by mail or direct deposit using address or account information on file with the CIRI Shareholder Relations department).
Under present law, distributions by the CIRI Settlement Trust are not anticipated to be taxable to the beneficiaries and would not have to be reported on their individual tax returns. Accordingly, shareholders would not receive an IRS Form 1099 for distributions received from the Settlement Trust and would not have to report those amounts on their tax returns.
Will the first $2,000 received from the CIRI Settlement Trust be excluded when determining eligibility for federal and state assistance programs?
It is not clear if cash distributions from a settlement trust will be excluded in the same way that the first $2,000 of cash distributions from an ANC are excluded. CIRI and other ANCs believe they should be. Proposed legislation would raise the excluded amount from $2,000 to $5,000, provide for periodic adjustments for inflation and clarify that distributions from a settlement trust would be excluded in the same manner.
Yes. By law, CIRI must continue to make 7(j) payments to at-large shareholders and village corporations directly, and at-large shareholders will continue to receive an IRS Form 1099, which reports that income to the IRS.
This decision is up to the CIRI Board of Directors, but it is likely CIRI will contribute cash or marketable securities to the CIRI Settlement Trust to fund distributions.
The Trustees will decide what benefits will be administered by the Trust. Distributions from the Trust are expected to replace some or all of CIRI’s dividends and future Elders’ Trust payments. Other benefits may include burial assistance, training and internships, cultural activities and other programs that are consistent with the Trust’s purpose of promoting the health, education and welfare of the beneficiaries and preserving the heritage and culture of Alaska Native people.
CIRI shareholders elect CIRI Board members and, by law, the CIRI Board must appoint the Trustees. To this extent, CIRI shareholders would be able to voice their desires for programs to be funded from the Trust.
No. CIRI will maintain its mission of promoting the economic and social well-being and Alaska Native heritage of our shareholders, now and into the future, through prudent stewardship of the company’s resources, while furthering self-sufficiency among CIRI shareholders and their families.
CIRI utilizes multiple tools to reduce its tax liability. However, as the company grows, it faces increased taxes. If implemented, the CIRI Settlement Trust would be an additional tool that the corporation could effectively use to reduce tax liability. One major advantage of the Settlement Trust over other methods is that the Trust is expected to reduce shareholders’ tax liability in addition to the corporation’s.
What if the federal tax law changed and CIRI couldn’t use the Trust? Are the tax benefits in perpetuity?
The tax benefits from the CIRI Settlement Trust for shareholders and the corporation under the new tax law are designed to last forever. While federal tax law could change, CIRI believes it is unlikely that the Settlement Trust provision would be eliminated. CIRI constantly evaluates the appropriate course of action to reduce its tax liability.
With the formation of the CIRI Settlement Trust, will CIRI still have access to cash for potential investments?
CIRI utilizes several methods to access capital for projects or investments when needed, including stock and marketable securities accounts and bank financing. Those tools would still be available to the corporation to access capital quickly if needed.
The Trust would be a separate legal entity. In the unlikely situation that CIRI were to “end,” the Trust and its assets would not be liable for CIRI’s debts and obligations, if any. The Trustees would continue to be responsible for managing the Trust to promote the health, education and welfare of the Trust beneficiaries, and to preserve the heritage and culture of Alaska Native people.
CIRI is prepared to immediately establish the Trust if the shareholders vote in favor of it. Upon creation of the Trust, CIRI is required to fund the Trust within 60 days. The proposed initial funding is $50,000.
CIRI has taken a careful and thoughtful approach in the potential formation of a Settlement Trust. Over the past year, CIRI has observed and worked with other ANCs who have decided to form settlement trusts to determine best practices for setting up the Trust. CIRI began the conversation with shareholders in the August 2018 Raven’s Circle newsletter. The CIRI Board decided to include the vote on the Trust as part of the 2019 Annual Meeting, which provided the opportunity to conduct face to face discussions about the Trust with shareholders at the spring information meetings.
No. Your rights as a CIRI shareholder will not affected by the formation of the CIRI Settlement Trust.
No. The CIRI Foundation will continue to provide scholarships, grants and to fund other programs and services in fulfillment of its mission.
If the Trust ceases to exist, dividends would revert to being paid to shareholders directly from CIRI, as determined by the CIRI Board of Directors.
Yes. Although we aren't sure of the exact number, there are dozens known to exist. Alaska Native regional corporations Ahtna Regional Corporation, Bering Straits Native Corporation, Calista Corporation, Chugach Alaska Corporation, Doyon, Limited, and NANA Regional Corporation, as well as many village corporations, have created settlement trusts.
Yes. In 2003, CIRI shareholders voted to authorize the establishment and funding of an irrevocable settlement trust to provide Elders’ benefits to eligible original shareholders. In accordance with the vote, CIRI initially funded the CIRI Elders’ Settlement Trust with a $16 million contribution. When the CIRI Elders’ Settlement Trust was established, it was anticipated that eligible Elders would receive quarterly distributions of $450 until 2023. However, due to the 2008 global economic downturn on investments and the fact that shareholders are living longer than anticipated, the available funding to make Elders’ payments will run out in 2019. The CIRI Board of Directors has approved providing the necessary funding to cover any shortfall through year-end 2019, thereby ensuring that all eligible Elders will receive full payments in 2019, but a long-term solution is needed. The Settlement Trust could be the solution.
There are a variety of benefits to settlement trusts, but new tax advantages available to both shareholders and CIRI are the most significant.
As CIRI grows, CIRI faces increased taxes, and the more taxes CIRI pays, the less money there is to fund benefits for CIRI’s shareholders and descendants and to reinvest and continue to grow the Company. The federal Tax Cuts and Jobs Act (the Tax Act), which became law on Dec. 22, 2017, allows ANCs like CIRI to significantly reduce current and future federal income tax liability by providing benefits through a settlement trust. Specific to ANCs, Section 13821 of the Tax Act allows ANCs to claim a tax deduction for transfers of assets to a settlement trust, thereby allowing such transfers to occur on a pre-tax basis, rather than the after-tax basis that applied to distributions prior to the new legislation.
As a result, there would be more corporate resources available to finance trust benefits, which can include a variety of things, including shareholder distributions and health, cultural preservation and community enhancement programs and initiatives. In addition, although CIRI dividends have been taxable to shareholders for a number of years, in most circumstances distributions from the Settlement Trust would not be taxable to beneficiaries.
The CIRI Settlement Trust.
CIRI and the CIRI Settlement Trust would remain separate legal entities but be closely affiliated:
- The Settlement Trust will be created only if approved by a majority (over 50 percent) of the voting shares present or represented by proxy at the 2019 Annual Meeting of Shareholders.
- The Settlement Trust will be established and governed by a Trust Agreement.
- CIRI, as the “Settlor,” would initially create the Settlement Trust and contribute assets to fund the Settlement Trust.
- A Board of Trustees, comprised of the chairperson, vice chairperson, secretary, assistant secretary, treasurer, assistant treasurer and chair emeritus of the CIRI Board of Directors, would manage the Settlement Trust.
- The Trustees would make their own independent decisions regarding distributions and management of the Settlement Trust.
- The Settlement Trust would own its own assets, have its own financial statements, file its own tax returns and pay its own taxes.
- The Settlement Trust and its assets would not be liable for CIRI’s debts and obligations, and CIRI would not be liable for the Settlement Trust’s debts and obligations.
- CIRI would provide administrative services to the Settlement Trust.
Trustees owe a fiduciary duty to all beneficiaries. Alaska law and the Trust Agreement require each Trustee to act in good faith, as a prudent person would, using reasonable care, skill, and caution in the best interests of the beneficiaries of any fund created by the Settlement Trust.
In investing Settlement Trust assets, the Trustees are required to invest the assets as a prudent investor would. The Trustees will have access to CIRI personnel and can hire accountants, advisors, attorneys, financial consultants, managers, agents and assistants as necessary to accomplish the purposes of the Settlement Trust, and certain administrative functions, such as recordkeeping and paying distributions authorized by the Trustees, may be delegated. However, the Trustees will maintain ultimate control over the Settlement Trust and cannot delegate to a third party the basic fiduciary responsibility for overseeing the Settlement Trust.
Assets contributed to the Settlement Trust will no longer be available to CIRI. CIRI will not be able to use the contributed assets to invest in new businesses or opportunities, or as collateral for loans. After CIRI contributes assets to the Settlement Trust, CIRI will not be able to distribute these assets to its shareholders and will not receive earnings on the assets. This likely will result in some or all of CIRI’s dividends and distributions to its shareholders being replaced with distributions made by the Settlement Trust to its beneficiaries. The CIRI Board will take these impacts into account when it decides whether to contribute assets to the Settlement Trust, and what assets to contribute.
No, the Trust Agreement specifies that no Trustee shall be compensated for service as a Trustee.
While the decision to establish the Settlement Trust must be made by shareholders, by law the CIRI Board must appoint the Trustees.
Will CIRI Directors, executives, or employees get any special benefit from the CIRI Settlement Trust?
The beneficiaries of the Settlement Trust would be individuals who are CIRI shareholders or are Natives or descendants of Natives, as those terms are defined by ANCSA.
A settlement trust can provide a broad range of benefits to its beneficiaries, including, but not limited to, shareholder distributions. For example, distributions from the Settlement Trust are expected to replace some or all of CIRI’s dividends and future Elders’ Trust payments. Trust distributions will not be taxable in most circumstances, whereas CIRI dividends are generally taxable to shareholders. Other benefits may include, but would not be limited to, burial assistance, training and internships, cultural programs and other activities.
The Trustees will decide what benefits will be administered by the Settlement Trust. The Trust Agreement permits the Trustees, in their absolute discretion, to pay any income and principal of the Settlement Trust to the beneficiaries of the Settlement Trust, either per capita (equally among the beneficiaries, regardless of CIRI shareholder status) or pro rata (according to the type and number of CIRI shares owned). The Trust Agreement also authorizes the Trustees to adopt other programs that are consistent with the Settlement Trust’s purpose of promoting the health, education and welfare of the beneficiaries and preserving the heritage and culture of Alaska Native people - including defining the programs’ purposes and beneficiaries - and to modify or terminate benefit programs.
Nothing. Under the terms of the Trust Agreement, individuals who own CIRI stock are beneficiaries of the Settlement Trust.
Yes, when CIRI shares are transferred (for example, through stock gifting or inheritance), the transferred stock will automatically include interest in the Settlement Trust.
No, a shareholder cannot sell his or her interest in the Settlement Trust. A shareholder may only transfer his or her interest in the Settlement Trust by transferring his or her CIRI shares as permitted by ANCSA. For example, once shares are gifted to or inherited by someone, the recipient would become a CIRI shareholder and a Settlement Trust beneficiary. If a shareholder gives away all of his or her CIRI shares, he or she will cease to be a CIRI shareholder and also will cease to be a Settlement Trust beneficiary.
The CIRI Board of Directors is proposing to maintain the current dividend policy if the shareholders approve the Settlement Trust. Distributions from the Settlement Trust are expected to replace some or all of CIRI’s dividends, except the payments will be made through the Settlement Trust instead of directly by CIRI. Payments would be processed in the same manner as they have been (for example, by mail or direct deposit using address or account information on file with the CIRI Shareholder Relations Department) and, in most cases, Settlement Trust distributions will be tax-free to beneficiaries.
No. The 7(j) payments that CIRI currently pays to at-large shareholders and village corporations in April or May of each year come from payments that CIRI receives from other regional corporations. CIRI is obligated by law to make 7(j) payments to at-large shareholders and village corporations from the funds it receives, and the Settlement Trust cannot satisfy CIRI’s obligation to the at-large shareholders and village corporations. CIRI will continue to make 7(j) payments to at-large shareholders and village corporations directly, and at-large shareholders will continue to receive an IRS Form 1099, which reports that income to the IRS.
Because the CIRI Elders’ Settlement Trust is only funded through year-end 2019, the CIRI Board of Directors is proposing to provide Elders’ benefits after 2019 through the Settlement Trust. The proposed Elders’ benefits from the Settlement Trust would maintain the current level of payments and the current eligibility requirements of the CIRI Elders’ Settlement Trust; original shareholders who are 65 years of age or older, own at least one share of CIRI stock and are alive on the distribution date of record would be eligible to receive $450 quarterly Elders’ payments in the same manner as they have been, assuming adequate Settlement Trust funding.
The Trustees will have the discretion to make distributions to the beneficiaries. Distributions can be made on a pro rata basis (according to how many shares a beneficiary owns) or a per capita basis (the same amount to each shareholder, regardless of how many shares he or she owns), and the Trustees may also create separate funds for special purposes, such as an Elders’ fund.
Is there any requirement that a settlement trust distribute a particular percentage of its annual income?
No, a settlement trust would not have to distribute any of its annual income unless required by the trust agreement.
No. All distributions are at the discretion of the Trustees of the Settlement Trust.
Does the CIRI Settlement Trust disqualify a beneficiary from federal needs-based eligibility programs such as food stamps?
It is clear from ANCSA that the beneficiary’s interest in a settlement trust is not to be counted in determining eligibility. However, it is not clear whether cash distributions from a settlement trust can be excluded in the same way that the first $2,000 of cash distributions from an ANC are excluded.
A beneficiary’s interest in a settlement trust and distributions from a trust are subject to creditor action (including without limitation, levy attachment, pledge, lien, judgement execution, assignment, and the insolvency and bankruptcy laws) only to the extent that Settlement Common Stock and the distributions thereon are subject to such creditor action under section 1606(h) of ANSCA.
Generally, a settlement trust can be sued only for its own debts and not those of the shareholder-beneficiaries. However, a beneficiary’s interest in a settlement trust and the distributions of a settlement trust are subject to creditor action (including without limitation, levy attachment, pledge, lien, judgement execution, assignment, and the insolvency and bankruptcy laws) only to the extent that Settlement Common Stock and the distributions thereon are subject to such creditor action under section 1606(h) of ANCSA.
The Settlement Trust could last forever, but is authorized to be terminated by the Trustees if the value of the Trust is less than $50,000.
Contributions to the Settlement Trust are tax deductible for CIRI and taxable to the Settlement Trust. The Settlement Trust will be taxed at a very favorable rate of ten percent on ordinary income, such as interest income, and zero percent on capital gains and dividends. By contrast, ANCs are normally taxed at a rate of twenty-one percent, unless they have the ability to offset their taxable income. This alone produces a significant tax savings on income earned by a settlement trust versus income earned by CIRI.
Under present law, distributions by the Settlement Trust are not anticipated to be taxable to the beneficiaries and would not have to be reported on their individual tax returns. By contrast, current dividends and other distributions and benefits paid by CIRI are normally fully taxable to CIRI shareholders.
Will the amount of CIRI’s earnings affect the taxability of distributions made from the CIRI Settlement Trust to the Trust’s beneficiaries?
CIRI will provide administrative services for the Settlement Trust to account for Settlement Trust assets and distributions and identify and communicate with beneficiaries.
The financial statements of the Settlement Trust will be audited each year and an annual report reporting on the Trust’s financial performance will be provided to beneficiaries annually. The Board of Trustees will communicate other important information to beneficiaries in coordination with CIRI.
This is up to the CIRI Board of Directors. Settlement trusts can be funded in a variety of ways: one-time deposits similar to an endowment or an annual contribution, and with various types of assets, including cash, marketable securities and certain lands. It is likely CIRI will contribute cash or marketable securities to the Settlement Trust to fund distributions and other benefits. With certain exceptions, once assets are moved from CIRI to the Settlement Trust, they cannot be returned to the Company and are protected from creditors of the Company.
Yes. CIRI may not contribute any assets to the Settlement Trust that violate ANCSA or the Trust Agreement. State law prohibits a transfer of assets to the Settlement Trust that would violate the Board’s fiduciary duties, such as a transfer that renders CIRI insolvent. The Trust is prohibited from operating as a business, engaging in commercial harvest operations of contributed timber, selling real estate interests received from CIRI and receiving a conveyance of subsurface lands from CIRI. Under ANSCA, shareholder approval is required before CIRI can transfer all or substantially all its assets to the Settlement Trust.
No. Once funds or assets are contributed to the Settlement Trust they may be invested and managed only by the Settlement Trust for the generation and distribution of benefits to the Settlement Trust’s beneficiaries.
With limited exceptions, if a creditor’s claim arises against CIRI after assets are transferred to the Settlement Trust, the Trust is not liable for that claim.
Can ANCSA land placed in the CIRI Settlement Trust be seized by CIRI’s creditors or subjected to bankruptcy?
In general, the Settlement Trust must answer only for its own debts and the debts and obligations of CIRI at the time the Settlement Trust is established. CIRI’s debts and obligations that arise after assets are conveyed to the Settlement Trust cannot be recovered from the Trust. Moreover, ANCSA land in the Settlement Trust has all the same protections that land would have if owned by CIRI itself. These protections automatically apply to ANCSA land so long as the land is not developed, leased or sold to third parties. Additionally, ANCSA land cannot be seized by a creditor unless CIRI or the Settlement Trust waives in writing its protection from such seizures. ANCSA land in the Settlement Trust cannot be sold or otherwise transferred, unless it is transferred back to CIRI.
The Trustees may make any amendment to the Settlement Trust to the extent they determine such amendment is in the best interest of the Settlement Trust and the beneficiaries; however, the Trustees will have no authority to amend Article 3 (Transfers to Trust) or Article 9 (Fiduciary Powers) of the Settlement Trust. If any such amendment is determined to violate or is inconsistent with the purpose or intent of ANCSA or Title 13 of the Alaska Statutes, such amendment will be deemed void to the extent of such violation or inconsistency and the unamended provisions of the Settlement Trust will remain in full force and effect.
Settlement Trust Resolution
WHEREAS, the Alaska Native Claims Settlement Act (“ANCSA”) authorizes the creation of settlement trusts by Alaska Native Corporations to promote the health, education, and welfare of their beneficiaries and preserve the heritage and welfare of Alaska Native people;
WHEREAS, the shareholders of the corporation find, in furtherance of the purposes set forth above, that it is in the best interests of the corporation and its shareholders to provide certain benefits to its shareholders and Alaska Native people through an ANCSA Settlement Trust;
NOW, THEREFORE, BE IT RESOLVED, that the CIRI Settlement Trust be established in the form attached hereto as Exhibit A-1.
CIRI SETTLEMENT TRUST
COOK INLET REGION, INC. (CIRI), as Settlor (the “Settlor” or “CIRI”), hereby creates the CIRI SETTLEMENT TRUST (the “Trust”) effective as of ___________, _____________, 2019 and are the initial trustees of this Trust and, in that capacity, they and their successors are collectively referred to in this Trust as the “Trustees.” The Settlor is an Alaska Native corporation created under the Alaska Native Claims Settlement Act dated December 18, 1971, as amended (“ANCSA”). The Settlor creates this Trust as a Settlement Trust according to Section 39 of ANCSA and codified as 43 U.S.C. §1629e.
ARTICLE 1 PURPOSE OF TRUST
The purpose of the Trust is to promote the health, education and welfare of the beneficiaries and preserve the heritage and culture of Alaska Native people. The Trust shall at all times be operated for the sole benefit of its beneficiaries in accordance with ANCSA Section 39, and the laws of the State of Alaska. The Trust shall accomplish its purpose by making monetary distributions to the beneficiaries, as provided in this document, and providing other financial, nonmonetary and in-kind benefits and services to or for the benefit of beneficiaries.
ARTICLE 2 IDENTIFICATION OF BENEFICIARIES
The beneficiaries of this Trust (each individually a “beneficiary” and collectively the “beneficiaries”) consist of the individuals who own shares of stock in CIRI, or are Natives or Descendants of Natives. Without limitation of the foregoing and notwithstanding any provision of this Trust to the contrary (other than Article 6.3), the Trustees have discretion as to any class of beneficiaries that may be eligible for a particular distribution under this Trust, including the determination of specific beneficiaries and whether and to what extent to make distributions to such beneficiaries, and the establishment of policies and procedures ancillary thereto.
ARTICLE 3 TRANSFERS TO TRUST
Within sixty days of the effective date hereof, Settlor will transfer and assign to the Trust property of an amount and type to be determined by Settlor in its sole discretion, receipt of which will be acknowledged by the Trustees at such time as the transfer is completed. Such assets, together with any assets later added to this Trust, are referred to as the “Trust Estate.” Unless otherwise specified in writing at the time of the transfer, those assets will be held as provided in this Trust. Any conveyance in violation of Section 39(a) of ANCSA shall be void and any property so transferred shall not be included in the Trust Estate.
ARTICLE 4 IRREVOCABLE PROVISION
The Settlor declares that it has no right to alter, amend, modify, or revoke this Trust; to withdraw assets from the Trust; or to require changes in the investments of the Trust.
ARTICLE 5 LIMITED POWER TO AMEND
The Trustees may make any amendment to the Trust to the extent they determine such amendment is in the best interest of the Trust and the beneficiaries, provided, however, that (i) the Trustees shall have no authority to amend Article 3 or Article 9 of the Trust and (ii) to the extent any such amendment is determined to violate or is inconsistent with the purpose or intent of ANCSA or Title 13 of the Alaska Statutes, such amendment will be deemed void to the extent of such violation or inconsistency and the unamended provisions of this Trust will remain in full force and effect.
ARTICLE 6 DISTRIBUTIONS OF INCOME AND PRINCIPAL
The Trustees shall make distributions as provided in this Article:
6.1 Payment of Income and Principal. The Trustees, in their absolute discretion, may pay any income and principal of the Trust to the beneficiaries in accordance with the terms of this Trust. Absent clear and convincing evidence of bad faith, the Trustees’ decisions as to amounts to be distributed will be final.
6.2 Distributions Per Capita. The Trustees may make distributions equally among the beneficiaries, regardless of their equity interest in CIRI.
6.3 Distributions Pro Rata. Distributions to the beneficiaries may be made pro rata according to the class, series and number of CIRI shares owned. Notwithstanding anything herein to the contrary, and except as otherwise determined by the Trustees, cash distributions of the Trust that the Trustees reasonably determine are properly allocable to shareholders of CIRI on account of their equity interest in CIRI can only be made pro rata to the beneficiaries who are shareholders of CIRI based on the class, series and number of shares of CIRI held by each beneficiary on the record date for the distribution, or whose rights to such shares vested on the record date for the distribution, or to that beneficiary’s personal representative or other successor, as defined by law.
6.4 Establishment of Separate Funds. The Trustees may adopt programs that are consistent with the Trust's purpose. Each adopted benefit program shall be accompanied by written documentation approved by the Trustees that sets forth or describes (i) the benefit program's purpose and beneficiaries, (ii) any mandatory or permissive limitations on investment of the benefit program's fund, (iii) any mandatory or permissive limitations on use of the benefit program's fund, and (iv) other matters the Trustees deem essential to the benefit program. Distributions and benefits shall be made to, among and for the benefit of the beneficiaries in such manner as may be provided in the accompanying written documentation, and except as otherwise provided in such written documentation or in this Trust document, and subject to Article 6.3, do not need to be proportional to, or based on, ownership of shares of the Settlor. The Trustees may modify any written documentation regarding a specific benefit program and may terminate a benefit program even if this would result in making some beneficiaries ineligible under a benefit program, or would reduce or cancel benefits provided by a benefit program, without regard to whether this results in unequal treatment of current beneficiaries compared to past, future or potential beneficiaries.
6.5 Disclaimer. Notwithstanding any other provision of this Trust to the contrary, any beneficiary or, if the beneficiary is a minor or has adjudicated legally incapacitated, his or her duly authorized legal fiduciary, may irrevocably disclaim his or her right to receive a particular type or types of benefit payments unless and until such time as the beneficiary or, if appropriate, his or her duly authorized legal fiduciary, provides notification that the payment type or types should resume. Such disclaimers and notices shall specify the type or types of benefit payment or payments being disclaimed, or resumed, and must be signed, dated and delivered to the Trustees’ designated agent, and shall become effective beginning with the next payment of the specified type or types that are authorized by the Trustees and have a record date falling after the date upon which the disclaimer or notice was received.
ARTICLE 7 CONTINUATION AND TERMINATION OF TRUST
7.1 Perpetual Trust Permitted. The Trustees may continue the administration of this Trust in perpetuity, as expressly permitted by 43 U.S.C. §1629e(b)(4).
7.2 Termination of Trust Permitted. Whenever the value of the Trust Estate is less than $50,000, the Trustees may terminate the Trust and distribute the remaining income and principal as provided in Article 6.
ARTICLE 8 PROVISIONS GOVERNING TRUSTEES
The following provisions apply to all Trustees appointed under this Trust:
8.1 Appointment of Trustees. There shall be seven (7) Trustees consisting of the Chairperson, Vice Chairperson, Secretary, Assistant Secretary, Treasurer, Assistant Treasurer and Chair Emeritus of the CIRI Board of Directors, as exclusively determined by CIRI in accordance with ANCSA Section 39(b)(2). If a Trustee ceases to serve in such capacity or if one or more such positions on the CIRI Board ceases to exist, the CIRI Board will determine whether or not to replace that Trustee or whether to appoint a successor Trustee, as the case may be. Only a natural person may be appointed as a Trustee.
8.2 Vacancies, Resignation, and Removal of Trustees. Subject to Article 8.1 of this Trust, Article III, Section 4 of the Amended and Restated By-Laws of CIRI, effective as of February 17, 2012 (as may subsequently be amended or modified) shall govern the rules regarding vacancies, resignation, and removal of Trustees (replacing the term “Board of Directors” with “Trustees” and the term “Director” with “Trustee” where such terms are used in the By-Laws).
8.3 Information to Settlor and Notifications to Beneficiaries. The Trustees shall timely furnish to and request from Settlor whatever information is reasonable and necessary to make any necessary tax elections for the Trust, determine the tax attributes of distributions to the beneficiaries, and provide required notifications to beneficiaries.
8.4 Acts by Other Fiduciaries. The Trustees shall take reasonable steps to compel a former Trustee or other person to deliver trust property to the Trustees, and may also require a former Trustee to render a full and final accounting showing the assets held in trust and all receipts and disbursements, but are not otherwise required to question any acts or failures to act of the fiduciary of any other trust or estate, and will not be liable for any prior fiduciary’s acts or failures to act. The Trustees can require a beneficiary who requests an examination of another fiduciary’s actions or omissions to advance all costs and fees incurred in the examination, and if the beneficiary does not, the Trustees may elect not to proceed or may proceed and offset those costs and fees directly against any payment that would otherwise be made to that beneficiary.
8.5 Court Supervision. The Settlor waives compliance by the Trustees with any law requiring bond, registration, qualification, or accounting to any court, unless otherwise required by ANCSA.
8.6 Compensation. No Trustee shall be paid compensation for services as a Trustee.
8.7 Indemnity. Any Trustee will be entitled to receive (and the continuing Trustees shall make suitable arrangements to provide) reasonable indemnification and security to protect and hold that Trustee harmless from any damage or liability of any nature that may be imposed upon the Trustee because of his or her actions or omissions while serving as Trustee. This protection, however, does not extend to a Trustee’s negligent actions or omissions that clearly and demonstrably result in damage or liability. A prior Trustee may enforce these provisions against the current Trustees or against any assets held in the Trust. This indemnification right will extend to the estate, personal representatives, legal successors, and assigns of a Trustee.
8.8 Multiple Trustees.
(a) Authority. If only two Trustees are serving, any power or discretion of the Trustees may be exercised only by their joint agreement. If more than two Trustees are serving, any power or discretion of the Trustees may be exercised only by a majority of the Trustees. Notwithstanding the foregoing, if a Trustee is unavailable to perform duties because of absence, illness, disqualification under other law, or other temporary disability, and prompt action is necessary to achieve the purposes of the Trust or to avoid injury to Trust property, the remaining Co-Trustee, if only one, or a majority of the remaining Trustees, if more than one, may act on behalf of the Trust. Any action required or permitted to be taken at a meeting of the Trustees may be taken without a meeting if written consents, setting forth the action taken and identical in content, are signed by all of the Trustees entitled to vote with respect to the subject matter thereof.
(b) Delegation. The Trustees may delegate to any one or more of themselves the authority to act on behalf of all the Trustees and to exercise any power held by the Trustees. Trustees who consent to the delegation of authority to other Trustees will be liable for the consequences of the actions of those other Trustees as if the consenting Trustees had joined the other Trustees in performing those actions; provided, that any delegation of authority to a Trustee who is suspended or removed as provided in Article 8.2 shall be null and void as of the time of such suspension or removal until such Trustee is reinstated or replaced pursuant to Article 8.2. The Trustees may delegate to the President and CEO, Chief Operating Officer or Chief Financial Officer of Settlor (the “Authorized Officers”) the authority to sign checks and other administrative documents on behalf of the Trust. Trustees who consent to the delegation of authority to Authorized Officers will be liable for the consequences of the actions of those Authorized Officers as if the consenting Trustees had performed those actions.
(c) Dissents. A dissenting Trustee who did not consent to the delegation of authority to another Trustee and who has not joined in the exercise of a power or discretion cannot be held liable for the consequences of the exercise. A dissenting Trustee who joins only at the direction of the majority will not be liable for the consequences of the exercise if the dissent is expressed in writing and delivered to any of the other Trustees (other than a suspended Trustee) before the exercise of that power or discretion.
ARTICLE 9 FIDUCIARY POWERS
The Settlor grants to the Trustees full power to deal freely with any property in the Trust. The Trustees may exercise these powers independently and without the approval of any court, unless otherwise required by ANCSA. No person dealing with the Trustees need inquire into the propriety of any of their actions or into the application of any funds or assets. The Trustees however, shall exercise all powers in a fiduciary capacity in good faith, as a prudent person would, using reasonable care, skill, and caution, for the best interest of the beneficiaries of any Fund created in this Trust. Without limiting the generality of the foregoing, the Trustees are given the following discretionary powers in addition to any other powers conferred by law, subject to any legal prohibitions and the provisions of this Trust document.
9.1 Tax Elections. To make any tax elections for the Trust as the Trustees deem appropriate.
9.2 Receipt of Certain Revenues. To receive, hold, and distribute natural resource revenues the Trustees receive under Section 7 of ANCSA.
9.3 Type of Assets. Except as otherwise provided to the contrary, to hold funds uninvested for such periods as the Trustees deem prudent, and to invest in any assets the Trustees deem advisable without responsibility for depreciation or loss on account of those investments, or because those investments are non-productive, as long as the Trustees act in good faith.
9.4 Original Assets. Except as otherwise provided to the contrary, to collect and retain the original assets they receive for as long as they deem best, and to dispose of those assets when they deem advisable, even if such assets, because of their character or lack of diversification, would otherwise be considered improper investments for the Trustees.
9.5 Tangible Personal Property. To receive and hold tangible personal property; to pay or refrain from paying storage and insurance charges for such property; and to permit any beneficiaries to use such property without either the Trustees or beneficiaries incurring any liability for wear, tear, and obsolescence of the property.
9.6 Financial Accounts. To deposit trust money in one or more accounts in regulated financial service institutions, including, but not limited to, banks, savings institutions, and brokerage houses, and to draw checks, drafts, or other forms of withdrawal, including electronic transfers, from those accounts.
9.7 Specific Securities. To invest in assets, securities, or interests in securities of any nature, whether obtained in domestic or foreign markets; and to invest in mutual or investment funds.
9.8 Property Transactions. To buy, sell, pledge, exchange, or lease any real or personal property, publicly or privately, for cash or credit, without court approval and upon the terms and conditions the Trustees deem advisable; to execute deeds, leases, contracts, bills of sale, notes, mortgages, security instruments, and other written instruments; to grant, acquire, or exercise options; to abandon or dispose of any real or personal property in the Trust that has little or no monetary or useful value; to improve, repair, insure, subdivide and vacate any property; to erect, alter or demolish buildings; to adjust boundaries; and to impose easements, including conservation easements, restrictions, and covenants, as the Trustees see fit. An instrument described in this Article 9.8 will be valid and binding for its full term even if it extends beyond the full duration of the Trust.
9.9 Maintain Assets. To expend whatever funds they deem proper for the preservation, maintenance, or improvement of assets.
9.10 Insurance. To obtain property, casualty, liability or any other insurance for the Trust, including insurance for the Trustees and their agents, against damage or liability arising from administration of the Trust.
9.11 Advisors. To employ and compensate attorneys, accountants, advisors, financial consultants, managers, agents, and assistants (including any individual or entity who provides investment advisory or management services, or who furnishes professional assistance in making investments for the Trust) without liability for any act of those persons, if they are selected and retained with reasonable care. Fees may be paid from the Trust Estate even if the services were rendered in connection with ancillary proceedings.
9.12 Distributions to Minors or to Adult Wards. To make a distribution to any person under 18, or to any adult person who has been adjudicated legally incapacitated, in accordance with Article 11.
9.13 Nominee. Except as prohibited by law, to hold the property of the Trust unregistered, without affecting its liability; and to hold securities endorsed in blank, in street certificates, at a depository trust company, or in a book entry system.
9.14 Custodian. To employ a custodian or agent (“the Custodian”) located anywhere within the United States, at the discretion of the Trustees but at the expense of the Trust; to register securities in the name of the Custodian or a nominee thereof without designation of fiduciary capacity; and to appoint the Custodian to perform such other ministerial functions as the Trustees may direct. While such securities are in the custody of the Custodian, the Trustees will be under no obligation to inspect or verify such securities nor will the Trustees be responsible for any loss by the Custodian.
9.15 Administer Claims. To contest, compromise, arbitrate, or otherwise adjust claims in favor of or against the Trust, including paying those claims in part or in full; to agree to any rescission or modification of any contract or agreement; and to refrain from instituting any suit or action unless indemnified for reasonable costs and expenses.
9.16 Corporate Rights. To vote and exercise any option, right, or privilege to purchase or convert bonds, notes, stock, securities, or other property; to delegate those rights to an agent; to enter into voting trusts and other agreements or subscriptions; to participate in any type of liquidation or reorganization of any enterprise; as well as all related transactions.
9.17 Business Interests. To hold interests in sole proprietorships, general or limited partnerships, joint ventures, business trusts, land trusts, limited liability companies, and other domestic and foreign forms of organizations; and to exercise all rights in connection with such interests as the Trustees deem appropriate, including any powers applicable to a non-admitted transferee of any such interest.
9.18 Self-Dealing. To exercise all their powers even though they may also be acting on behalf of CIRI in the same matters. The Trustees, however, shall exercise these powers at all times in a fiduciary capacity, primarily in the interest of the beneficiaries of the Trust. Despite any other provision of this Trust, no Trustee may participate in the decision to make a discretionary distribution that would discharge a legal support obligation of that Trustee. All power to make such distributions will be exercised solely by the remaining Trustees.
9.19 Expenses. To pay all expenses of administration for the Trust Estate, including, but not limited to, all taxes, assessments, and legal and accounting fees.
9.20 Allocation to Income and Principle. To treat premiums and discounts on bonds and other obligations for the payment of money in accordance with generally accepted accounting principles or tax accounting principles and, except as otherwise provided to the contrary, to hold nonproductive assets without allocating any principal to income, despite any laws or rules to the contrary.
9.21 Use of Income. Except as otherwise provided in this Trust, and in addition to all other available sources, to exercise their discretion in the use of income from the assets of the Trust to satisfy the liabilities described in this Trust, without accountability to any beneficiary.
9.22 Consolidated Funds. Unless inconsistent with other provisions of this Trust, to hold two or more trusts or other funds in one or more consolidated funds, in which the separate trusts or funds have undivided interests, except an accounting must be rendered to each trust showing its undivided interests in those funds.
9.23 Valuations. In making distributions or allocations under the terms of this Trust to be valued as of a particular date, to use asset valuations obtained for a date reasonably close to that particular date (such as a quarterly closing date falling immediately before or after that date) if, in the Trustees’ judgment, obtaining appraisals or other determinations of value on that particular date would result in unnecessary expense, and if in the Trustees’ judgment, the fair market value, as determined, is substantially the same as on that actual date. This paragraph will not apply if valuation on a specific date is required to preserve a qualification for a tax benefit, including any deduction, credit, or most favorable allocation of an exemption.
9.24 Incorporation. To incorporate any business or venture, and to continue any unincorporated business the Trustees determine to be not advisable to incorporate.
9.25 Investment Manager. To employ any investment management service, financial institution, or similar organization to advise the Trustees, handle some or all of the Trust investments and render all accountings of funds held on the Trust’s behalf under custodial, agency, or other agreements.
9.26 Depreciation. To deduct depreciation expense, computed in accordance with generally accepted accounting principles.
9.27 Disclaim Assets or Powers. To disclaim any assets otherwise passing, or any fiduciary powers pertaining to any trust created hereunder, by execution of an instrument of disclaimer meeting the requirements of applicable law generally imposed upon individuals executing disclaimers. No notice to or consent of any beneficiary, other interested person, or any court is required for any such disclaimer, and the Trustees are to be held harmless for any decision to make or not make such a disclaimer.
9.28 Related Parties. To enter into any transaction on behalf of the Trust, despite that another party to that transaction may be: (i) a business or trust controlled by the Trustees, or of which the Trustees, or any director, officer, or employee of the Trustees, is also a director, officer, or employee; (ii) an affiliate or business associate of any beneficiary or the Trustees; or (iii) a beneficiary or Trustee under this Trust acting individually, or any relative of such a party.
9.29 Winding Up. On termination, to exercise the powers appropriate to wind up the administration of the Trust and distribute the remaining assets to the persons entitled to them, and to retain a reasonable reserve for the payment of debts, expenses, and taxes.
ARTICLE 10 DELIVERY TO BENEFICIARIES
Except as noted below, or as otherwise required by law, all notices, communications, voting materials, and payments shall be provided to beneficiaries in any one or more of the following methods (i) by mail, to the most recent address furnished to the Trustees by an agent of the Settlor, (ii) by providing electronic notice to an email address furnished to Settlor or the Trust for any purpose, (iii) by posting an notice on Settlor’s website, or (iv) by such other method as determined by the Trustees.
To the extent that this Trust requires a notice to be given to a beneficiary who is a minor or who has been adjudicated legally incapacitated, or when any distribution under this Trust becomes due or payable to a minor, or to a person who has been adjudicated legally incapacitated, then the Trustees shall give such notice or cause such amounts to be paid out as required by law and policies established by the Trustees.
Receipt of a distribution by the person to whom payment is made in accordance with the law and policies established by the Trustees will constitute full discharge of the Trustees with respect to that payment.
Notwithstanding any other provision herein, the Trustees may hold a beneficiary’s payment in accordance with the law and the practices, policies and procedures of the Settlor.
ARTICLE 11 ASCERTAINING BENEFICIARIES
The Trustees shall have no duty or responsibility to determine the identity of any beneficiary, or to verify the completeness or accuracy of any shareholder or beneficiary list furnished to the Trustees by the Settlor’s agent.
ARTICLE 12 UNCLAIMED DISTRIBUTIONS
For the life of the Trust, and subject to Settlor’s practices, policies and procedures related to abandoned or unclaimed distributions, the Trust shall hold any unclaimed distributions for subsequent payment to the beneficiary, or to that beneficiary’s personal representative or other successor, as defined by law, without interest. Any distributions that remain unclaimed after the period of time prescribed in Settlor’s practices, policies and procedures related to abandoned or unclaimed distributions may be cancelled and forfeited to the Trust to be used to advance the purpose of the Trust. In the event the Trust is terminated, (i) any distributions that have been held and are unclaimed for one (1) year or more shall be forfeited by such beneficiary and distributed proportionately to all other beneficiaries, and (ii) any distributions that have been held less than one (1) year shall be held until such distributions have been held for a total of one (1) year, at which time the unclaimed distribution shall be forfeited and distributed proportionately to all other beneficiaries. In addition, if a beneficiary's share of the final Trust distribution is returned to the Trustees as unclaimed, and remains unclaimed for six (6) months thereafter, the unclaimed distribution shall thereafter be forfeited and distributed proportionately to all beneficiaries with known addresses.
ARTICLE 13 BENEFICIARY PROTECTION
Except as otherwise expressly set forth herein (i) no beneficial interest in this Trust shall be subject to anticipation, assignment, pledge, sale, gift or transfer in any manner; (ii) no beneficiary shall have the power to anticipate, encumber, or charge such beneficial interest; and (iii) no beneficial interest shall be liable for or subject to the debts, contracts, obligations, liabilities, or torts of any beneficiary or of any other person. The provisions of this Article 13 shall be cumulative to and not in lieu of any provisions of state or federal law (including without limitation Sections 7 and 39 of ANCSA).
ARTICLE 14 PROHIBITION OF CERTAIN ACTIVITIES
Despite any provision of the Trust to the contrary, and as further specified in 43 U.S.C. §1629e(b)(1), the Trustees shall not:
(a) Operate the Trust (or any Fund created by the Trust) as a business;
(b) Hold as an asset of the Trust Estate a controlling interest in a corporation, partnership, or limited liability company that operates a business;
(c) Alienate any land or any interests in land received from Settlor, except the Trustees may alienate such land (or interests in such land) back to Settlor; or
(d) Discriminate in favor of a group of individuals composed only or principally of employees, officers, or directors of CIRI.
With respect to any activity described in Article 14(b), the Trustees may by written instrument rescind or relinquish any power, right or authority retroactively relative to any business or asset, nunc pro tunc, so that such power, right or authority shall be deemed to the extent permitted by law to have never existed and be void ab initio relative to such business or asset. In the event that a court of competent jurisdiction shall determine that this Trust is operating as, or has previously operated as, a business, then the terms herein shall be interpreted to the maximum extent permitted by law that any adverse impact upon the Trust including without limitation as a settlement trust under ANCSA be minimized to the greatest extent possible so as to minimize adverse impacts upon the beneficiaries. Accordingly, in the event of such a determination, the Trust shall request any such court that the sole remedy imposed by such court shall be as follows: with regard to any exercised or unexercised power, right or authority of the Trustees as to any business or asset owned in whole or in part by the Trust, to declare nunc pro tunc that any such offending power or right is null and void ab initio, so that such right or power shall be deemed for all purposes to have never existed or to otherwise direct the relinquishment by the Trustees of any power, right or authority, and with regard to an action or transaction that has taken place, to fashion an equitable remedy that protects the status of this Trust as a "settlement trust" within the meaning of ANCSA and minimizes adverse impacts upon the beneficiaries.
ARTICLE 15 TRUST SITUS & ADMINISTRATION
All questions regarding the law to be applied or the appropriate situs of any trust will be governed by the terms of this Article as follows:
15.1 Validity; Construction and Venue. All matters involving the validity, interpretation, construction, and meaning (or effect) of the Trust created under this instrument are to be governed by Alaska law and ANCSA. The venue for any dispute arising under this Trust shall be Anchorage, Alaska.
15.2 Principal Place of Administration. All matters involving the administration of the Trust created under this instrument are to be governed by Alaska law, which is the principal place of administration (the “situs”) of the Trust. The Trustees shall not change the situs of the Trust.
ARTICLE 16 MISCELLANEOUS PROVISIONS
16.1 Definitions. As used in this Trust, the following terms have the meanings set forth below:
(a) Descendants of Natives has the same meaning as set forth in 43 U.S.C. §1602(r).
(b) Native or Natives have the same meaning as set forth in 43 U.S.C. §1602(b).
(c) The words will and shall are used interchangeably in this Trust and, unless the context clearly indicates otherwise, when referring to the Trustees, mean that the Trustees must take the action indicated; as used in this Trust, when referring to the Trustees, the word may means that the Trustees have discretionary authority to take the action, but are not automatically required to do so.
16.2 Right to Information. The Trustees shall provide the Settlor with any information the Settlor requests concerning actions taken by the trustees and the operation of the Trust, including, but not limited to, a full listing of its assets.
16.3 Notices to the Trust. Any person or entity entitled or required to give notice under this Trust shall exercise that power by a written instrument clearly setting forth the effective date of the action for which notice is being given. The instrument may be executed in counterparts.
(a) Facts. A certificate signed and acknowledged by the Trustees stating any fact affecting the Trust Estate or the Trust will be conclusive evidence of such fact in favor of any transfer agent and any other person dealing in good faith with the Trustees. The Trustees may rely on a certificate signed and acknowledged by any beneficiary or any documentation signed by a representative of Settlor stating any fact concerning the Trust beneficiaries, including dates of birth, relationships, or marital status, unless an individual serving as Trustee has actual knowledge that the stated fact is false.
(b) Copy. Any person may rely on a copy of this instrument (in whole or in part) certified to be a true copy by the Settlor; by any person specifically named as a Trustee; or, if there are none of the above, by any then serving Trustee.
16.5 Gender and Number. Reference in this Trust to any gender includes either masculine or feminine, as appropriate, and reference to any number includes both singular and plural where the context permits or requires.
16.6 Headings. Use of descriptive titles for articles and paragraphs is for convenience only and is not intended to restrict the application of those provisions.
16.7 Further Instruments. The Settlor agrees to execute such further instruments as may be necessary to vest the Trustees with full legal title to the property transferred to this Trust.
16.8 Savings Clause. If any provision of this Trust is determined to violate any law, that provision will be deemed void; the remaining provisions of this Trust will remain in full force and effect.
16.9 Acknowledgements. Acknowledgments of this trust agreement and matters affecting the administration of the Trust may be given for purposes of recording such instruments, but the absence of an acknowledgment does not affect the validity of those instruments.
16.10 Binding Effect. This trust agreement extends to and is binding upon the Settlors, successors, and assigns, and upon the Trustees.