STAND. COM. REP. NO. 382-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: H.B. No. 2143
                                     H.D. 1




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committees on Judiciary and Hawaiian Affairs and
Consumer Protection and Commerce, to which was referred H.B. No.
2143 entitled: 

     "A BILL FOR AN ACT RELATING TO THE UNIFORM PRINCIPAL AND
     INCOME ACT,"

beg leave to report as follows:

     The purpose of this bill is to revise and update Hawaii's
Uniform Principal and Income Act, Chapter 557, Hawaii Revised
Statutes.
 
     Testimony in support of this bill was provided by Hawaii's
Commission to Promote Uniform Legislation, the Hawaii Bankers
Association, Pacific Century Trust, and Central Pacific Bank.

     Your Committees find this revision will complement and
facilitate the application of the Uniform Prudent Investor Act,
chapter 554C, Hawaii Revised Statutes, adopted in 1997, which
allows a trustee to utilize modern portfolio theory to guide
investment decisions.

     Your Committees further find that this bill contains
language similar to that drafted by the National Conference of
Commissioners on Uniform State Laws, with the following
substantive variations.  First, § -105 and § -106 of this bill
add a notice procedure, based on California law, that permits a
trustee to give beneficiaries notice of a proposed action, and
allows the beneficiary to object or seek a court order to modify

 
 
                                 STAND. COM. REP. NO. 382-00
                                 Page 2

 
the proposed plan.  Second, with regard to charitable trusts, §
-104(c)(4) of this bill permits a trustee to convert principal to
income to distribute more to charities, but prohibits the trustee
from withholding distributions to charities (by converting income
to principal) without a court order.  Third, in § -501,
Disbursements from income, and § -502, Disbursements from
principal, this bill clarifies that other statutory fee
provisions and the trust instrument take precedence over the
provisions of this bill.  Thus, section 607-18, Hawaii Revised
Statutes will continue to control the allocation of trustee fees
for private trusts.

     Your Committees amended § -105 of this bill to provide that
in ruling on a beneficiary's objection to a trustee's proposed
action, the court must decide whether the trustee's proposed
action constitutes an abuse of discretion, rather than whether
the action should be taken.  Your Committees find this
modification, based on California law, provides a more
appropriate standard for the court to apply.  Your Committees
further amended this bill by rewording §  -412, Timber, for
clarity. Your Committees made additional technical, non-
substantive revisions for the sake of clarity and consistency. 
  
     As affirmed by the records of votes of the members of your
Committees on Judiciary and Hawaiian Affairs and Consumer
Protection and Commerce that are attached to this report, your
Committees are in accord with the intent and purpose of H.B. No.
2143, as amended herein, and recommend that it pass Second
Reading in the form attached hereto as H.B. No. 2143, H.D. 1, and
be referred to the Committee on Finance.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committees on Judiciary and
                                   Hawaiian Affairs and Consumer
                                   Protection and Commerce,

                                   
                                   
                                   
                                   
______________________________     ______________________________
RON MENOR, Chair                   ERIC G. HAMAKAWA, Chair