Pakirarahi No.2 Trust is located in the Hauraki area. It was created in 1977 as an Ahu Whenua Trust (previously known as s.438 Trust under the Māori Affairs Act 1953). The Trust had 287 owners and the land was held in seven separate land blocks.
In 2002 the Trust had 506 owners and all land held by the Trust was amalgamated into one title. The landholding totals 610 hectares and is all Māori freehold land.
The Trust's core business activity is in mineral development (gold), native timber recovery (kauri) and commercial investments (property and shares). The Trust has five trustees and three subcommittees for education, forestry and minerals. The trustees make up the subcommittees with some trustees covering two committees.
Overall the Trust retains an administrator on a part-time basis, a forestry supervisor and a geologist. The Trust also uses the services of chartered accountants who act as financial advisors and Whenua Kete Ltd is used for secretarial and administration services.
The Trust employs a forestry supervisor who measures the timber and supervises any contractors. This operation is separate from the Trust and is on a royalty basis whereby the Trust is paid for stumpage. The Trust has considered having a joint venture relationship instead, but this would require management time from the trustees (since the work is not sufficient to employ someone fulltime), and would potentially confuse the roles of management and governance.
Timber covers 80% of the Trust's land block. The process of recovering kauri involves recovering the trees (stumps/trunks) that have been felled and left in the forest (some as a result of a massive wind storm hundreds of years ago, and others as a result of logging in the early 1900s). The Trust does not allow milling of live trees on the block.
Over the years the Pakirarahi No.2 Trust has had multinational mining companies as joint venture partners. At present it is negotiating with a potential joint venture partner. The Trust also has a consultant geologist retained on a permanent basis.
Formulating the Trust's initial strategic plan involved the trustees and a consultant having workshops. The plan was then taken to the AGM for input. Some modifications were made and the plan was then signed off. This initial strategic plan set the platform and the Trust has worked off this plan ever since.
The Trust's current strategic plan runs from 2003-2005. The plan is reviewed every three years so that the Trust can be more flexible in its business activities. The Trust also wanted owners to formally measure the trustees' performance on a regular basis. Although the Plan is reviewed every three years, longer term horizons are documented in the strategy.
Once the trustees modify the plan, the plan is sent out to all owners before the AGM and is then approved by the owners at the AGM. The basic strategy has remained the same; there have been few fundamental changes made in the last two strategic plans.
The annual business plan is derived from the strategic plan. The Trust's financial year runs from April to March. In September the Trust reports on the previous financial year as the accounts have by then been audited. In February the annual business plan and budgets for the following financial year are approved. This coincides with the renewal of the timber contract.
Any trustee can bring investment opportunities to the Trust. Usually such opportunities are 'spotted' through the FoMA network, Lake Taupō Forest Funds, other trusts (eg Taharoa C) or various other channels. The Trust has a policy about the proportion of assets that can go in different business activities. The trustees on the investment subcommittee decide whether the investment complies with the strategic plan.
Once this is completed a cost benefit analysis is undertaken and all information is taken back to the trustees where they approve a full due diligence process to be undertaken. This process is undertaken by an independent professional. Once this is completed it goes back to the trustees for final approval. The trustees do not need to go back to owners as provisions for investments are made in the strategic plan.
The Trust uses policies to mitigate risks. For example, in forestry operations the Trust requires public liability insurance for any licence, and for investments the Trust has a policy that investments must have a debt to equity ratio of 70:30.
The Trust does not have a conflict of interest register. However all conflicts of interest are declared at the meetings and are documented. If there is a conflict the trustee usually leaves the room unless the particular trustee is required to participate in the discussion. Examples include approving education grants, discussing a possible investment where a trustee is a business partner in the investment or a director of a competing company. In such cases the particular trustee would be absent from the decision making process. However, in one particular case the trustee was asked to participate in the discussion to provide information before the other trustees made the decision.
The major changes or milestones the Trust has achieved since its inception are:
Pakirarahi No 2 Trust is continually reviewing its strategic plan looking at generic issues on governance. The Board also talks informally with other Māori trusts and professional directors about what they are doing in the way of good governance practices.
The Trust strives for all business affairs to be managed prudently and according to best practice. The Trust ensures that all channels of communication are honest and transparent.
Best practice is also provided for in the values that underpin the Trust's role as kaitiaki. As kaitiaki they will always ensure that best practices are adhered to in the use of their land.
The financial accounts are available for owners to peruse. The Trust also sends out a mid-year newsletter and an AGM is held in the last quarter of the year.
Apart from financial reporting, the Trust undertakes various activities that it can report against. The Trust distributes education grants to owners or descendents of owners and koha kauri timber to marae for cultural purposes (pouwhenua, poupou etc).
The Trust manages all activities consistent with kaitiakitanga practices. Kaitiakitanga values are recognised by the Trust and are practised accordingly.
The Trust has not adopted any formal practice for reviewing the Board as a collective or as individuals but would not oppose such an idea. The financial performance of the Trust is seen as a reflection of the Board's collective performance.
The Trust engages with shareholders through newsletters and at the AGM. The trustees themselves will engage with stakeholders, the chairperson in particular, engages with stakeholders on political issues.
Elections are not undertaken by rotation but come about because trustees resign or owners express their dissatisfaction with particular trustees. An election has yet to be held because of the latter reason. People are nominated and are asked to provide a curriculum vitae or profile. The candidates then present themselves at the AGM and voting is carried out by secret ballot.
As stated above, the Trust has a forestry supervisor and a consultant geologist. On the administrative side of the business, all accounting functions are contracted to an accounting firm and the administrative and secretarial services are also contracted out to a specialist firm. The Trust's limited land based activities means that there is not a lot of management involved and hence the Trust does not have a Trust manager or CEO. However, the employment policy is to employ the best person for the job.
The Trust has not delegated any authority for capital expenditure. All expenditure is monitored through the accounting system. Each manager (including the geologist and timber contractor) reports at every Board meeting. If a matter of conflict arises with management, a member of the relevant subcommittee liaises with the manager and then reports back to the subcommittee and the subcommittee will make recommendations to the trustees. The final decision is made by all trustees.
All contracts are reviewed annually or when a contract is up for renewal. However, if the need arises to cancel a contract, the Trust will execute this. In the past the Trust Board has cancelled a contract because of misappropriation of timber and poor performance against the contract.
Although the Trust does not have an operations manual, all policies are documented in the minutes. Operational policies have culminated from practice and experience. The operations policies are constantly reviewed.
Before the land was amalgamated, the Trust had seven trustees: a representative for each whānau block. On one occasion there were three nominations for the one whānau block and it was decided that 10 trustees would be elected. They passed a resolution and the necessary amendment was made to their constitution.
However, once the land was amalgamated into one block, the philosophy behind representation changed from whānau based to skills-based representation. The owners elect trustees with various skills. The Trust tries to have trustees with the following skills:
Over the years the number of trustees has slowly reduced often due to trustees retiring or passing away, or to reduce overheads. There are currently five trustees. Although the chairperson believes there is potential to have one more trustee, he also believes that this is an optimum number for the time being, as no mining activity is being undertaken. The chairperson also has a casting vote in a deadlock situation. However, over 25 years “95% of decisions have been by consensus”. If trustees get into an entrenched position on a particular decision, the issue is often carried over to a second meeting.
The Trust has no formal policy for professional development of trustees. Training is provided on an 'as needed basis'. The trustees attend various industry conferences, particularly the FoMA conference. All trustees also have the opportunity to do the Institute of Directors course.
The Trust also has a 'buddy' system where an owner can 'buddy' with a trustee which enables the owner to attend meetings. Although the concept has been approved in principle it is yet to be realised but is something the Trust hopes will eventuate in the future.
The basic approach to assets is that an asset should be recognised only when it is possible that the service potential or future economic benefits embodied in the assets will eventuate; and the asset possesses a cost or other value that can be measured reliably. Accordingly, the Trust reports on the activity and possible value of the mineral rights. Negotiations on minerals are taking place and the trustees expect shortly to make a decision on the mineral rights and value them accordingly. If the value of the minerals reaches expectations, then the Trust could possibly become one of the largest FoMA members.
Last modified: 7/06/2011
