2005 Texas Property Code CHAPTER 163. MANAGEMENT, INVESTMENT, AND EXPENDITURE OF INSTITUTIONAL FUNDS

PROPERTY CODE

CHAPTER 163. MANAGEMENT, INVESTMENT, AND EXPENDITURE OF 
INSTITUTIONAL FUNDS


	§ 163.001. SHORT TITLE.  This chapter may be cited as the 
Uniform Management of Institutional Funds Act.

Added by Acts 1989, 71st Leg., ch. 213, § 1, eff. May 26, 1989.            


	§ 163.002. LEGISLATIVE FINDINGS AND PURPOSE.  (a) The 
legislature finds that:
		(1)  publicly and privately supported educational, 
religious, and charitable organizations perform essential and 
needed services in the state;
		(2)  uncertainty regarding legal restrictions on the 
management, investment, and expenditure of endowment funds of the 
organizations has in many instances precluded obtaining the highest 
available return on endowment funds;  and
		(3)  the organizations, their officers, directors, and 
trustees, and the citizens of this state will benefit from removal 
of the uncertainty and by permitting endowment funds to be invested 
for the long-term goals of achieving growth and maintaining 
purchasing power without adversely affecting availability of funds 
for current expenditure.
	(b)  The purpose of this chapter is to provide guidelines for 
the management, investment, and expenditure of endowment funds of 
publicly and privately supported educational, religious, and 
charitable organizations in order to eliminate the uncertainty 
regarding legal restrictions on the management, investment, and 
expenditure of the funds and to enable the organizations to 
maximize their resources.

Added by Acts 1989, 71st Leg., ch. 213, § 1, eff. May 26, 1989.  
Amended by Acts 1993, 73rd Leg., ch. 240, § 1, eff. May 22, 1993.


	§ 163.003. DEFINITIONS.  In this chapter:                                   
		(1)  "Endowment fund" means an institutional fund, or 
any part of such a fund, not wholly expendable by the institution on 
a current basis under the terms of the applicable gift instrument.
		(2)  "Gift instrument" means a will, deed, grant, 
conveyance, agreement, memorandum, writing, or other governing 
document, including the terms of any institutional solicitations 
from which an institutional fund resulted, under which property is 
transferred to or held by an institution as an institutional fund.
		(3)  "Governing board" means the body responsible for 
the management of an institution or of an institutional fund.
		(4)  "Historic dollar value" means the aggregate fair 
market value in dollars of:
			(A)  an endowment fund at the time it became an 
endowment fund;            
			(B)  each subsequent donation to the fund at the 
time it is made;  and     
			(C)  each accumulation made pursuant to a 
direction in the applicable gift instrument at the time the 
accumulation is added to the fund.
		(5)  "Institution" means an incorporated or 
unincorporated organization organized and operated exclusively for 
educational, religious, or charitable purposes, an institution of 
higher education, or a foundation chartered for the benefit of an 
institution of higher education.  The term does not include a 
private foundation as defined by Section 509(a) of the Internal 
Revenue Code of 1986.
		(6)  "Institutional fund" means a fund held by an 
institution for its exclusive use, benefit, or purposes, except a 
fund held for an institution by a trustee that is not an institution 
or a fund in which a beneficiary that is not an institution has an 
interest other than possible rights that could arise on violation 
or failure of the purposes of the fund.
		(7)  "Institution of higher education" has the meaning 
assigned by Section 61.003, Education Code.

Added by Acts 1989, 71st Leg., ch. 213, § 1, eff. May 26, 1989.  
Amended by Acts 1993, 73rd Leg., ch. 240, § 2, eff. May 22, 1993.


	§ 163.004. EXPENDITURES.  (a) A governing board may 
appropriate for expenditure, for the uses and purposes for which 
the fund is established, the net appreciation, realized and 
unrealized, in the fair market value of the assets of an endowment 
fund over the historic dollar value of the fund to the extent 
prudent under the standard provided by Section 163.007.
	(b)  A determination of the historic dollar value made in 
good faith by the governing board is conclusive.
	(c)  Subsection (a) does not limit the authority of the 
governing board to expend funds as permitted under other law, the 
terms of the applicable gift instrument, or the charter or articles 
of incorporation of the institution.
	(d)  Subsection (a) does not apply if the applicable gift 
instrument indicates the donor's intention that the net 
appreciation not be expended.  A restriction on the expenditure of 
net appreciation may not be implied from a designation of a gift as 
an endowment or from a direction or authorization in the applicable 
gift instrument to use only "income."  This rule of construction 
applies to gift instruments executed or in effect before, on, or 
after the effective date of this chapter.
	(e)  Repealed by Acts 2001, 77th Leg., ch. 1158, § 89, 
eff. June 15, 2001.

Added by Acts 1989, 71st Leg., ch. 213, § 1, eff. May 26, 1989.  
Amended by Acts 1993, 73rd Leg., ch. 240, § 3, eff. May 22, 1993;  
Acts 2001, 77th Leg., ch. 1158, § 88, 89, eff. June 15, 2001.


	§ 163.005. INVESTMENT AUTHORITY.  In addition to an 
investment authorized by other law or by the applicable gift 
instrument, and without restriction to investments a fiduciary may 
make, the governing board, subject to any specific limitations in 
the applicable gift instrument or the applicable law other than law 
relating to investments by a fiduciary, may:
		(1)  invest an institutional fund in any real or 
personal property, including mortgages, stocks, bonds, debentures, 
and other securities of profit or nonprofit corporations, shares in 
or obligations of associations, partnerships, or individuals, and 
obligations of any governmental entity, whether or not the property 
produces a current return;
		(2)  retain property contributed by a donor to an 
institutional fund;       
		(3)  include all or any portion of an institutional 
fund in a pooled or common fund maintained by the institution;  and
		(4)  invest all or any portion of an institutional fund 
in a pooled or common fund, including shares or interests in 
regulated investment companies, mutual funds, common trust funds, 
investment partnerships, real estate investment trusts, or similar 
organizations in which funds are commingled and investment 
determinations are made by persons other than the governing board.

Added by Acts 1989, 71st Leg., ch. 213, § 1, eff. May 26, 1989.            


	§ 163.006. DELEGATION OF INVESTMENT MANAGEMENT.  Except 
as provided by the applicable gift instrument, the governing board 
may:
		(1)  delegate to its committees, officers, or employees 
of the institution or the fund, and other agents, including 
investment counsel, the authority to act for the board in 
investment of institutional funds;
		(2)  contract with independent investment advisors, 
investment counsel, investment managers, banks, or trust companies 
to act for the board in investment of institutional funds;  and
		(3)  authorize payment of compensation for investment 
advisory or management services.

Added by Acts 1989, 71st Leg., ch. 213, § 1, eff. May 26, 1989.            


	§ 163.007. STANDARD OF CONDUCT.  In the administration of 
the powers to appropriate appreciation, to make and retain 
investments, to develop and apply investment and spending policies, 
and to delegate investment management of institutional funds, 
members of a governing board shall exercise ordinary business care 
and prudence under the facts and circumstances prevailing at the 
time of the action or decision.  The members shall consider both the 
long-term and short-term needs of the institution in carrying out 
its educational, religious, or charitable purposes, its present and 
anticipated financial requirements, the expected return on its 
investments, price level trends, and general economic conditions.

Added by Acts 1989, 71st Leg., ch. 213, § 1, eff. May 26, 1989.            


	§ 163.008. RELEASE OF RESTRICTIONS ON USE OR 
INVESTMENT.  (a) With the written consent of the donor, the 
governing board may release, in whole or in part, a restriction 
imposed by the applicable gift instrument on the use or investment 
of an institutional fund.
	(b)  If written consent of the donor cannot be obtained 
because of the donor's death, disability, unavailability, or 
impossibility of identification, the governing board may apply in 
the name of the institution to the district court for release of a 
restriction imposed by a gift instrument on the use or investment of 
an institutional fund.  The attorney general must be notified of the 
application and given an opportunity to intervene in the same 
manner as provided by Chapter 123 for a proceeding involving a 
charitable trust.  If the court finds that the restriction is 
obsolete, inappropriate, or impracticable, it may by order release 
the restriction in whole or in part.  A release under this 
subsection may not change an endowment fund to another type of fund.
	(c)  A release under this section may not allow a fund to be 
used for a purpose other than the educational, religious, or 
charitable purposes of the affected institution.
	(d)  This section does not limit the application of the 
doctrine of "cy pres."

Added by Acts 1989, 71st Leg., ch. 213, § 1, eff. May 26, 1989.            


	§ 163.009. APPLICABILITY OF OTHER PARTS OF 
CODE.  Subtitle B, Title 9 (the Texas Trust Code), does not apply to 
any institutional fund subject to this chapter.

Added by Acts 1989, 71st Leg., ch. 213, § 1, eff. May 26, 1989.