§ 59-21-03 — Appropriation for expenditure or accumulation of endowment fund - Rules of construction

of construction.
1. Subject to the intent of a donor, as expressed in the gift instrument and subject to
subsection 4, an institution may appropriate for expenditure or accumulate so much of
an endowment fund as the institution determines is prudent for the uses, benefits,
purposes, and duration for which the endowment fund is established. Unless stated
otherwise in the gift instrument, the assets in an endowment fund are donor-restricted
assets until appropriated for expenditure by the institution. In making a determination
to appropriate or 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 shall consider, if relevant, the following factors:
a. The duration and preservation of the endowment fund;
b. The purposes of the institution and the endowment fund;
c. General economic conditions;
d. The possible effect of inflation or deflation;
e. The expected total return from income and the appreciation of investments;
f. Other resources of the institution; and
g. The investment policy of the institution.
2. To limit the authority to appropriate for expenditure or accumulate under subsection 1,
a gift instrument specifically must state the limitation.
3. 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 create
an endowment fund of permanent duration unless other language in the gift instrument
limits the duration or purpose of the fund and do not otherwise limit the authority to
appropriate for expenditure or accumulate under subsection 1.
4. The appropriation for expenditure in any year of an amount greater than seven percent
of the fair market value of an endowment fund, calculated on the basis of market
values determined at least quarterly and averaged over a period of not less than three

years immediately preceding the year in which the appropriation for expenditure is
made, creates a rebuttable presumption of imprudence. For an endowment fund in
existence for fewer than three years, the fair market value of the endowment fund
must be calculated for the period the endowment fund has been in existence. This
subsection does not:
a. Apply to an appropriation for expenditure permitted under law other than this
chapter or by the gift instrument; or
b. Create a presumption of prudence for an appropriation for expenditure of an
amount less than or equal to seven percent of the fair market value of the
endowment fund.