GRANT NtJMBER al - TUV(iSF)

WT gEEMEuT

(Special Operations)

(Preparir';g'the F.un.afi,ifi Wafer.and.Sariitgtion 'Projed;)

between

TUV ALU

and

ASIAN DEVELOPMENT BANK

DATED 20 JULY 2020

TUV 53417

GRANT AGREEMENT

(Speciat Operations)

GRANT AGREEMENT dated 20 July 2020 between TUVALU ("Recipient") andASIAN DEVELOPMENT BANK ("ADB').

WHEREAS

(A) the Recipient has applied to ADB for a grant under an ADB projectreadiness financing ("PRF") to finance preparatory activities for the prospective pro3ect ("PRFActivitres") descr?bed in Schedule ! h:this GrantAgreement; and

(B) ADB has agreed to make a grant to the Recipient from ADB's SpecialFunds resources upon the terms and conditions set forth herein;

NOW THEREFORE the parties hereto agree as follows:

ARTrCLE r

&amtts;Dns

Section 1.01. All provisions of ADB's Special Operations GrantRegulations, dated 1 January 2017 ("Grant Regulations"), are hereby made applicable to thisGrant Agreement with the same force and effect as if they were futly set forth herein, sublect,however, to (he foTTowing modT+Tcatrons:

(a:) The term "PrOje(.,t" Wherevier it -appezT.i in "the G'rar!tt &'gtTlatiOnS aS aaaf,inea rerm, asnau iDe 'suDstatea =D7 tne ten '.:PRF Actrva-.

(b) The term "Project Executing Agency" wherever it appears in the GrantRegulations as a defined term, shall be substituted by the term "PRFExecuting Agency".

Section 1.02. Wherever used in this Grant Agreement, the severalterms defined in the Grant Regulatins have the respective rrear theretri set forth un!essmodified herein. or the context otherwise requires. Addittorial terms used I!Th ttus GraritAgreecnerx rave tii e rxff'bavwing mearr6qs:

(a) "Consulting Services" means consulting services as described in theProcurement Regulations and set out in the Procurement P!an, and tobe financed out of the proceeds of the Grant;

(b) 'EnsuingProjecf'meanstheprospectiveprojectto'befinanced'byADB,as further desa tn Schedule 1 to this Grant Agreement;

(C)

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@l "MW'maamh'raiMmFiroR;

"PAM" means the project administration manual for the PRF Activitiesdated 04 May 2020 and agreed between the Recipient and ADB, asupdated from time to time in accordance with the respectivedulllllllblldtlvs piuceaures orme Recipiern ana ADB;

?RF Execufing Agency" for the purposes of, and mfhin fhe meaning of,;trie ayTaFi4 Reguiatirai'vs, im'eanS MOF or siy stiiccessor t!veretoacceptable to ADB, which is responsible for the carrying out of the PRFActivities;

"PRF Implementing Agencies" means the Ministry of Local Governmentan€i AgTiCuituTe, '[ne MTTTTSQ OT meaT[n, )Ot,TaT VVeElTe an(] (>enCTeTl anathe Ministry of Public Utilities, Infrastructure, and Environment, or anysussor thereto acceptable to ADB;

"Procurement Plan" means the procurement plan for the PRF Activitiesdated 04 May 2020 and agreed between the Recipient and ADB, asupdated from time to time in accordance with the Procurement Policy,the Procurement Regulations, and other arrangements agreed withADt3;

"Promremgrit Policy" meam AOB's Procurement Policy - Goods,'fA5[k'S, NaqCOristift!ri9 ari6oCa.risgitirig SeNiCeS (20"i7, aS afienCie6 frOmtime to time); and

"Procurement Regulations" means ADB's Procurement Regulations forADB Borrowers - Goods, Works, Nonconsulting and ConsultingServices i2M7, ab siiieii(it,u riciti'i 'iiti'it, ku 'itttie').

ARTICLE 11

The Grant

Section 2.01. ADB agrees to make available to the Recipient fromADB's Special Furaasrasources an arri offourmillAori u.s. Dollars ($4,000,000).

ARTICLE 111

Use of Proceeds of the Grant

Section 3.01. The Recipient sha(l cause the proceeds of the Grant tobe applied exclusively to the finaricing ot: experiitures relatyng to the PRF Achvittes bnaccordanw.with the pcovigons of this Grant Agreement

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Saefjorm3i.G32. Tine proceetis o€ tie Grariti sihaii.- me aiitetf ari6withdrawn in accordance with the provisions of Schedule 2 to this Grant Agreement, as suchSchedule may be amended from time to time by agreement between the Recipient and ADB.

Section 3.03. Except as ADB may otherwise agree, the Recipient shallprocure, OT cause 'ro ne procurea, rne irems OT expenorture to oe rinancet:i our OT me proceeas

of.the Grant in.aooor4a with 't'rve pmvtsmns of Sule 3 to ihis Grant Agreement.

Seotion 3.i04. 'AXitho'rawais from *he Graxiit Aoootnt iin respect ofConsulting Services shall be made only on account of expenditures relating to:

(a) Consulting Services which are supplied from such member countries ofADB as shall have been specified by ADB from time to time as eligiblesources fUl !I ULu I UI I IHI li, dl uj

(b) Consulting Services whicti meet such ofher ei'igfbFl'ity req,t.iiremenfs asStaif. !'iaVe beeh. spec!'ffie6 f)'3( ADB f'at"n:tiIrm6t fQ' tiint:.

Section 3.05. The Grant Closing Date for the purposes of Section 8.02of the Grant Regulations shall be 31 December 2023 or such other date as may from time totime be agreed between the Recipient and ADB.

ART1eLE IV

P;xlat Covenants

Section 4.01 In the carrying out of the PRF Activities, the Recipientshall perform, or cause to be performed, all obligahons set forth in Schedule 3 to this GrantAgreement.

Section4.02. (a) The Recipient shan (i) maintain separateaccounts. and. records for the PRF Activities; (iii) prepare a)ilniuali financiiaiA stia4eents for thePRF Adivit.ies in accordance with financial reporting standards acceptabte- to ADB; (iii) havesuch finacnciai staterrhenYs auditeJ annmi{y txy mdependerb aWiXocs; whose qiuajiFicatiaria,experience and terms of reference are acceptable to ADB, in accordance with auditingstandards acceptable to ADB; (iv) as part of each such audit, have the auditors prepare areport, which includes the auditors' opinion(s) on the financial statements and the use of theGrant proceeds, and a management letter (which sets out the deficiencies in the internalcontroi of the PRF Activities that were identified in the course of the audit, if any); and (v)fumish 5 ADB, no later =than 6 monfhs derthe end cif each related fiscal year, copies of suchaudited finarxjal siaternents, audii repori and managernent letter, all :in !the English language,.aria.sucn otrqer iint:oinmaJion :CORCBr.rii!tng u;>.ese oociainents.an6 ttae au6it tiereof as AD8 sriailfrom time to time reasonably request.

(b) ADB shall disclose the annual audited financial statements for the PRFActivities and the opinion of the auditors on the financial statements within 44 days of the dateof ADB's confirmation oT the?r acceptabmty by post?ng them on ADB's webs?te.

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T)aie R'eC!g)(eiTif st-teff eiiie54e ADBy iup(Dt71i AD8:s feQtiaSi, to 6i!Saii6i 'U!€financial statements for the PRF Activities and the Recipient's financial affairs where they relateto the PRF Activities with the auditors appointed pursuant to subsection (a)(iii) hereinabove,and shall authorize and require any representative of such auditors to participate in any suchdiscussions requested by ADB. This is provided that such discussions shall be conducted onlyIn me presence or an aumonZeO orrlcer ovme KeCiplerff, uniess rne txecipient snall otnerwise

agree.

SeC*On 4.1G3. -iiiDe tReC'p:en'it 9habf enef:kie AtThB'S FepfeSerna:iiVeS Oinspect the PRF Activities and any relevant records and documents.

ARTt € tE V

E&ctmeness

Section 5.01. A date 90 days after the date of this Grant Agreement isspecified for the effectiveness of this Grant Agreement for the purposes of Section 9.04 of theGrant Regulations.

ARTICtE Vl

Mjscallaneous

Section 6.01. The Minister of Finance of the Recipient is designated asrepresentative of the Recipient for the purposes of Section 11.02 of the Grant Regulations.

Section 6.02. The foTiowing addresses are specified for the purposesof Section 11.01 of the Grant Regulations:

For the Reent

Ministry of FinancePrivate Mail BagVaiaku, FunafutiTuvaTu

For Af)B

Asian Development Bank6 ADB Avenue

Mandaluyong CityI 550 Metro Man'ila

Philippines

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F;aesWe Nt:

(632) 636- 2444(632) 636- 2446.

iN 'v'i/i-iNESS 'v"v'HEFtEOF ttqe. pacbi'es kverefio, actifing tiirtrougm tit'xei:rrepresentatives thereunto duly authorized, have caused this Grant Agreement to be signed intheir respective names as of the day and year first above written and to be delivered at theprincipal office of ADB.

TUV ALU

ANTHONY KENNETH MCDONALD

Authorized Representative

ASIAN DEVELOPMENT BANK

LEAH GUTIERRE=Z

Director General

PaC!fiC DefJa:rnaiTi

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a"C'n'E"uv"'i"c' i

Description of the PRF Activities

The PRF ACiivitieS Stian 'comprise:

.a') project preparatory act'iyities iri the form of: preparing a 2020- 2040

sanitation services; settling the project scope; preparing project due diligenceand detailed engineering design; designing the pro3ect's awareness andeducation program; building the capacity of the PRF Executing Agency and thePRF Implementing Agencies in areas such as safeguards, procurement,genOe5 i ii iai Lldl 11 Idl Idgt,l I tt,l i t, cu iil TTa'TS'[r[unC)nar STeTTg[neTlrng'; anCJ St)ppOning

strategic procurement planning exercse and advanced zrocurernervt actyris;and

Implementing Agencies in water supply and sewerage services and projectmanagement; supporting the establishment of a Centralized Water Authority;carrying out a public awareness and community outreach campaign on waterresource and sanitation issues; and reviewing the water supply and seweragetari'fr frameworR.

2. Ura'less otherwise -agreed ibetween the Rec.ipierat.and A'DB, the PR'F Activitiesare iexpe(Ae€! fO sijppcrlf preparafirCiri O'i IFie Furaimtjt! '!!ater .ariu 'Sai'j!'taf!Cifli 'PrOjed Vtitl'i U'ieobjective to increase access to safe water and improve sanitation in Funafuti.

The PRF Activities are expected to be completed by 30 June 2023.

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:xMED4jLE 2

Allocation and Withdrawal of Grant Proceeds

Generai

1. The table attached "to 'thars 8cheelde se;ts forth 'the Categories of iterns of

proceeds to each such Category ("Table"

Basis for Withdrawal from the Grant Account

2. Except as ADB may otneirse agree, ti"re pmcee6s of The 'Gr'ant s;riaii oe

allocated to items oF expenditure, and disbursed on the basis of the withdrawal percentage foreach item o( expenditure, as set forth. in the Tabte.

Disbursement Procedures

3. Except as ADB may otherwise agree, the Grant proceeds shall be disbursed inaccordance with the Loan Disbursement Handbook.

IO

Schedtile 3

SCHEDULE 3

Execution of PRF Activities

lmplementation Arranqements

1. The Recipient, the PRF Exemting Agencyaod .the PRF Implementing Agenciesshaii ensure triat tne PRF Actiities ,ge iiffl@lemariteal iim .actaraance yitri ie cieiai+eaarrangements set forth in the PAM. Any subsequent change to the PAM shall become effectiveonly after approval of such change by the Recipient and ADB. In the event of any discrepancybetween the PAM and this Grant Agreement, the provisions of this Grant Agreement shallprevail.

Prohibited List of Investments

2, Tha.Recipient shall ensure, and shalf'aause the PRF Execut: Ag@riq amthe

PRF lrnplernentmyAgenteemgage, tm pmse#d&e(3mw4twew;adthkvarmam)activity included in the list of prohibited investment activities provided in Appendix 5 of theADB's Safeguard Policy Statement (2009).

Procurement

3. The Recipient shaTl ensure, and shall cause the 'PRF Executing Agency and thePRF Implementing Agencies to ensure, that:

i(a) *eproavcernentoft'ornsuiVrigServi4scarrieioutinaccomancewittithe Procurement Policy and the Procurement Regulations;

(b) Consulting Services shall be procured based on the detailedarrangements set forth in the Procurement Plan, including theprocurement and seTection meffnods, the type of bidd?ng documents, andADB's review requirements,. The Recipient may modify the detailedarrangernents set. taorth in the Procurernent Plan or+ly with the pnorar;)veewe.nr, ot AL)B., am, 81;lCni ixiaineaticim tzst oe set CM ui uHaxesto the Procurement Plan; and

(i) all Consulting Services obtained (including all computer hardware,software and systems, whether separately procured or incorporatedwithin other goods and services procured) do not viorate or infringe anyyndustrml property or 'ntellectual pmperty right or claim of any third party;and (Ai) a)1 mntracts for the procurernent of Consulting Smices containapprOp,jta!e lrepreSRtTh'[alDnS, -war.raraties arx:i, aT ap@ropraaxe, ,lflaemnlll8S

from the contractor, supplier, consultant or service provider with respectto the matters referred to in this subparagraph.

Governance and Anticorruption

4. The Rectpient, the PRF Executing Agency andthe PRF Impiementing Agenciesshall (a) complywith ADB's Anticorrupimn Poky i"l998, as arnended to date) and acknowkmge

fi

Schedule 3

that ADB reserves the right to investigate directly, or through its agents, any alleged corrupt,fraudulent, collusive or coercive practice relating to the PRF Activities, and (b) cooperate withany such investigation and extend all necessary assistance for satisfactory completion of suchinvestigation.

5. The Recipient, the PRF Executing Agency and the PRF lmplementing Agenciesshajl ensure that the ariticorruptior;i provisaoris acceptable to ADB are included in all biddingdocuments and contracts, including.provisions s,pecifying the.r+ght of.ADB to audit and examinetne remras ario accourts'ot tne J"RF Exeawinig Agani:q :ani trie.p'hh .bmipiemegvig Agenoiesand all contractors, suppliers, consultants, and other service providers as they relate to thePRF Activities.