UPMIFA HAWAII ACT 2009

CHAPTER 517E

UNIFORM PRUDENT MANAGEMENT OF INSTITUTIONAL FUNDS ACT

Section

517E-1 Short title

517E-2 Deﬁnitions

517E-3 Standard of conduct in managing and investing an

institutional fund

517E-4 Appropriation for expenditure or accumulation of

endowment fund; rules of construction

517E-5 Delegation of management and investment functions

517E-6 Release or modiﬁcation of restrictions on

management, investment, or purpose

517E-7 Reviewing compliance

517E-8 Application to existing institutional funds

517E-9 Relation to Electronic Signatures in Global and

National Commerce Act

[§517E-1] Short title. This chapter may be cited as the Uniform PrudentManagement of Institutional Funds Act. [L 2009, c 135, pt of §1]

[§517E-2] Deﬁnitions. As used in this chapter, unless the context otherwiserequires:

"Charitable purpose" means the relief of poverty, the advancement of education or religion, the promotion of health, the promotion of a governmental purpose, or any otherpurpose the achievement of which is beneﬁcial to the community.

"Community foundation" means a community foundation or community trustrecognized as exempt from federal income tax and referred to in Section 170(c) of theInternal Revenue Code of 1986, as amended, and which meets the single entity requirements of United States Treasury Regulations Sections 1.170A-9(e)(10-14) adopted thereunder.

"Endowment fund" means an institutional fund or part thereof that, under the terms ofa gift instrument, is not wholly expendable by the institution on a current basis. Theterm does not include assets that an institution designates as an endowment fund for its own use.

"Gift instrument" means a record or records, including an institutional solicitation,under which property is granted to, transferred to, or held by an institution as aninstitutional fund.

"Institution" means:

(1): A person, other than an individual, organized and operated exclusively for charitable purposes;
(2): A government or governmental subdivision, agency, or instrumentality, to theextent that it holds funds exclusively for a charitable purpose; or
(3): A trust that had both charitable and noncharitable interests, after allnoncharitable interests have terminated.

"Institutional fund" means a fund held by an institution exclusively for charitablepurposes. The term does not include:

(1) Program-related assets;

(2): A fund held for an institution by a trustee that is not an institution, unless the fundis held exclusively for the beneﬁt of a community foundation; or
(3): A fund in which a beneﬁciary that is not an institution has an interest, other thanan interest that could arise upon violation or failure of the purposes of the fund.

"Person" means an individual, corporation, business trust, estate, trust, partnership,limited liability company, association, joint venture, public corporation, government or governmental subdivision, agency, or instrumentality, or any other legal or commercialentity.

"Program-related asset" means an asset held by an institution primarily toaccomplish a charitable purpose of the institution and not primarily for investment.

"Record" means information that is inscribed on a tangible medium or that is storedin an electronic or other medium and is retrievable in perceivable form. [L 2009, c 135,pt of §1]

[§517E-3] Standard of conduct in managing and investing an institutional fund. (a) Subject to the intent of a donor expressed in a gift instrument, an institution, inmanaging and investing an institutional fund, shall consider the charitable purposes ofthe institution and the purposes of the institutional fund.

(1): Incur only costs that are appropriate and reasonable in relation to the assets, thepurposes of the institution, and the skills available to the institution; and
(2): Make a reasonable effort to verify facts relevant to the management andinvestment of the fund.
(G): The needs of the institution and the fund to make distributions and topreserve capital; and
(H): An asset's special relationship or special value, if any, to the charitablepurposes of the institution;
(2): Management and investment decisions about an individual asset shall not bemade in isolation but rather in the context of the institutional fund's portfolio ofinvestments as a whole and an overall investment strategy having risk and returnobjectives reasonably suited to the fund and to the institution;
(3): Except as otherwise provided by law other than this chapter, an institution may invest in any kind of property or type of investment consistent with this section;
(4): An institution shall diversify the investments of an institutional fund unless theinstitution reasonably determines that, because of special circumstances, the purposes of the fund are better served without diversiﬁcation;
(5): Within a reasonable time after receiving property, an institution shall make andcarry out decisions concerning the retention or disposition of the property or therebalancing of a portfolio, to bring the institutional fund into compliance with thepurposes, terms, and distribution requirements of the institution as necessary to meetother circumstances of the institution and the requirements of this chapter; and
(6): A person who has special skills or expertise, or is selected in reliance upon the person's representation that the person has special skills or expertise, has a duty to usethose skills or that expertise in managing and investing institutional funds. [L 2009, c 135, pt of §1]

[§517E-4] Appropriation for expenditure or accumulation of endowment fund; rules ofconstruction. (a) Subject to the intent of a donor expressed in the gift instrument, aninstitution may appropriate for expenditure or accumulate so much of an endowmentfund as the institution determines is prudent for the uses, beneﬁts, purposes, andduration for which the endowment fund is established. Unless stated otherwise in the gift instrument, the assets in an endowment fund shall be donor-restricted assets untilappropriated for expenditure by the institution. In making a determination to appropriateor accumulate, the institution shall act in good faith, with the care that an ordinarily prudent person in a like position would exercise under similar circumstances, and shallconsider, if relevant, the following factors:

(1): The duration and preservation of the endowment fund;
(2): The purposes of the institution and the endowment fund;
(3): General economic conditions;
(4): The possible effect of inﬂation or deﬂation;
(5): The expected total return from income and the appreciation of investments;
(6): Other resources of the institution; and
(7): The investment policy of the institution.

(b): To limit the authority to appropriate for expenditure or accumulate under subsection (a), a gift instrument shall speciﬁcally state the limitation.
(c): Terms in a gift instrument designating a gift as an endowment, or a direction or authorization in the gift instrument to use only "income", "interest", "dividends", or "rents,issues, or proﬁts", or "to preserve the principal intact", or words of similar import:
(1): Create an endowment fund of permanent duration unless other language in thegift instrument limits the duration or purpose of the fund; and
(2): Do not otherwise limit the authority to appropriate for expenditure or accumulateunder subsection (a). [L 2009, c 135, pt of §1]

[§517E-5] Delegation of management and investment functions. (a) Subject to any speciﬁc limitation set forth in a gift instrument or otherwise provided by law, an institutionmay delegate to an external agent the management and investment of an institutionalfund to the extent that an institution could prudently delegate under the circumstances.An institution shall act in good faith, with the care that an ordinarily prudent person in alike position would exercise under similar circumstances, in:

(1) Selecting an agent;

(2): Establishing the scope and terms of the delegation consistent with the purposes of the institution and the institutional fund; and
(3): Periodically reviewing the agent's actions to monitor the agent's performance and compliance with the scope and terms of the delegation.
(b): In performing a delegated function, an agent owes a duty to the institution toexercise reasonable care to comply with the scope and terms of the delegation.
(c): An institution that complies with subsection (a) shall not be liable for thedecisions or actions of an agent to which the function was delegated.
(d): By accepting delegation of a management or investment function from aninstitution that is subject to the laws of this State, an agent submits to the jurisdiction ofthe courts of this State in all proceedings arising from or related to the delegation or theperformance of the delegated function.
(b): The court, upon application of an institution, may modify a restriction containedin a gift instrument regarding the management or investment of an institutional fund ifthe restriction has become impracticable or wasteful, if it impairs the management or investment of the fund, or if, because of circumstances not anticipated by the donor, amodiﬁcation of a restriction will further the purposes of the fund. The institution shall notify the attorney general of the application, and the attorney general shall be given anopportunity to be heard. To the extent practicable, any modiﬁcation shall be made inaccordance with the donor's probable intention.
(c): If a particular charitable purpose or a restriction contained in a gift instrument onthe use of an institutional fund becomes unlawful, impracticable, impossible to achieve,or wasteful, the court, upon application of an institution, may modify the purpose of thefund or the restriction on the use of the fund in a manner consistent with the charitable purposes expressed in the gift instrument. The institution shall notify the attorney general of the application, and the attorney general shall be given an opportunity to beheard.
(e): If an institution determines that a restriction contained in a gift instrument on themanagement, investment, or purpose of an institutional fund is unlawful, impracticable,impossible to achieve, or wasteful, the institution, sixty days after notiﬁcation to theattorney general, may release or modify the restriction, in whole or part, if:
(3): The institution uses the property in a manner consistent with the charitablepurposes expressed in the gift instrument. [L 2009, c 135, pt of §1]

[§517E-7] Reviewing compliance. Compliance with this chapter shall be determinedin light of the facts and circumstances existing at the time a decision is made or action istaken, and not by hindsight. [L 2009, c 135, pt of §1]

[§517E-8] Application to existing institutional funds. This chapter shall apply toinstitutional funds existing on or established after July 1, 2009. As applied toinstitutional funds existing on July 1, 2009, this chapter shall govern only decisions made or actions taken on or after that date. [L 2009, c 135, pt of §1]

[§517E-9] Relation to Electronic Signatures in Global and National Commerce Act.This chapter shall modify, limit, and supersede the Electronic Signatures in Global andNational Commerce Act, 15 U.S.C. Section 7001 et seq., but shall not modify, limit, or supersede Section 101(c) of that Act, 15 U.S.C. Section 7001(c), or authorize electronic delivery of any of the notices described in Section 103(b) of that Act, 15 U.S.C. Section7003(b). [L 2009, c 135, pt of §1]