As filed with the Securities and Exchange Commission on October 1, 1999
1933 Act File No. 333-_____
1940 Act File No. 811-09603
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. _____ [ ]
Post-Effective Amendment No. _____ [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [X]
Amendment No. ____
(Check appropriate box or boxes.)
AMERICAN SELECT FUNDS
(Exact name of Registrant as Specified in Charter)
4333 Amon Carter Boulevard. MD 5645
Fort Worth, Texas 76155
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (817) 967-3509
WILLIAM F. QUINN, PRESIDENT
4333 Amon Carter Boulevard
Fort Worth, Texas 76155
(Name and Address of Agent for Service)
Copy to:
ROBERT J. ZUTZ, ESQ.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW
Washington, DC 20036
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of this Registration Statement
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said section 8(a),
may determine.
Registrant is adopting a master-feeder operating structure. This Registration
Statement includes signature pages for the AMR Investment Services Trust, the
master trust, and the American Select Funds, the feeder trust.
Page 1 of __ Pages
Exhibit Index Appears on Page __
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AMERICAN SELECT FUNDS
CONTENTS OF REGISTRATION STATEMENT
This registration statement is comprised of the following:
Cover Sheet
Contents of Registration Statement
Prospectus
Statement of Additional Information
Part C
Signature Pages
Exhibits
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[AMERICAN SELECT LOGO]
PROSPECTUS
January 1, 2000
AMERICAN SELECT CASH RESERVE FUND
Managed by AMR Investment Services, Inc.
THE SECURITIES AND EXCHANGE COMMISSION DOES NOT GUARANTEE THAT THE INFORMATION
IN THIS PROSPECTUS OR ANY OTHER MUTUAL FUND'S PROSPECTUS IS ACCURATE OR
COMPLETE, NOR DOES IT JUDGE THE INVESTMENT MERIT OF THIS FUND. TO STATE
OTHERWISE IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
ABOUT THE FUND
Overview..........................................2
Cash Reserve Fund.................................2
The Manager.......................................4
Valuation of Shares...............................5
ABOUT YOUR INVESTMENT
Purchase and Redemption of Shares.................5
Distributions and Taxes...........................7
ADDITIONAL INFORMATION
Distribution of Trust Shares......................7
Master-Feeder Structure...........................7
Year 2000.........................................7
Additional Information...................Back Cover
ABOUT THE FUND
OVERVIEW
The American Select Cash Reserve Fund (the "Fund") is managed by AMR
Investment Services, Inc. (the "Manager"), a wholly owned subsidiary of AMR
Corporation.
The Fund operates under a master-feeder structure. This means that the
Fund seeks its investment objective by investing all of its investable assets in
the Money Market Portfolio (the "Portfolio") of the AMR Investment Services
Trust (the "Trust"), which has an identical investment objective. Throughout
this Prospectus, statements regarding investments by the Fund refer to
investments made by the Portfolio. For easier reading, the term "Fund" is used
throughout the Prospectus to refer to either the Fund or the Portfolio, unless
stated otherwise. See "Master-Feeder Structure".
AMERICAN SELECT CASH RESERVE FUND
INVESTMENT OBJECTIVE
Current income, liquidity and the maintenance of a stable price of $1.00
per share.
PRINCIPAL STRATEGIES
The Fund invests exclusively in high quality variable or fixed rate, U.S.
dollar denominated short-term money market instruments. These securities may
include obligations of the U.S. Government, its agencies and instrumentalities;
corporate debt securities, such as commercial paper, master demand notes, loan
participation interests, medium-term notes and funding agreements; Yankee dollar
and Eurodollar bank certificates of deposit, time deposits, and bankers'
acceptances; asset-backed securities; and repurchase agreements involving the
foregoing obligations.
The Fund will only buy securities with the following credit qualities:
o rated in the highest short-term categories by two rating
organizations, such as "A-1" by Standard & Poor's Corporation and
"P-1" by Moody's Investors Service, Inc.,
o rated in the highest short-term category by one rating organization
if the securities are rated only by one rating organization, or
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o unrated securities that are determined to be of equivalent quality
by the Manager.
The Fund invests more than 25% of its total assets in obligations issued
by the banking industry. However, for temporary defensive purposes when the
Manager believes that maintaining this concentration may be inconsistent with
the best interests of shareholders, the Fund may not maintain this
concentration.
Securities purchased by the Fund generally have remaining maturities of
397 days or less, although instruments subject to repurchase agreements and
certain variable and floating rate obligations may bear longer final maturities.
The average dollar-weighted maturity of the Fund will not exceed 90 days.
RISK FACTORS
o The yield paid by the Fund is subject to changes in interest rates.
As a result, there is risk that a decline in short-term interest
rates would lower its yield and the overall return on your
investment.
o Although the Fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the
Fund.
o As with any money market fund, there is the risk that the issuers or
guarantors of securities owned by the Fund will default on the
payment of principal or interest or the obligation to repurchase
securities from the Fund.
Your investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.(1)
Annual Fund Operating Expenses (expenses that are deducted from Fund
assets)
Management Fees............................0.10%
Distribution (12b-1) Fees..................0.00
Other Expenses.............................0.06(2)
----
Total Annual Fund Operating Expenses.......0.16%
====
Fee Waiver.................................0.04(3)
Net Expenses...............................0.12%
(1) The expense table and the Example below reflect the expenses of both
the Fund and its corresponding Portfolio.
(2) Other Expenses are based on estimates for the current fiscal year.
(3)The Manager has contractually agreed to waive a portion of Management
Fees through December 31, 2000 to the extent that Total Annual Fund
Operating Expenses exceed 0.12%.
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. The Example assumes that
you invest $10,000 in the Fund for the time periods indicated and then redeem
all of your shares at the end of those periods. The Example also assumes that
your investment has a 5% return each year, that all dividends and distributions
are reinvested, and that the Fund's operating expenses remain the same. Net
Expenses were used to calculate the cost for year one, and Total Annual Fund
Operating Expenses were used to calculate costs for years two and three.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
1 YEAR 3 YEARS
------ -------
$12 $47
INVESTMENT ADVISER
AMR Investment Services, Inc.
PERFORMANCE OF SIMILAR AADVANTAGE FUND
Shares of the American Select Cash Reserve Fund were not offered prior to
January 1, 2000. The performance in the chart and table below is that of the
American AAdvantage Money Market Fund - Institutional Class ("AAdvantage Fund"),
a substantially similar Fund managed by the Manager that began offering its
shares on September 1, 1987 and that invests in the Portfolio. Because the
AAdvantage Fund had moderately higher expenses, its performance was slightly
worse than the Fund would have realized. The AAdvantage Fund is not offered in
this Prospectus. The bar chart below provides an indication of risk by showing
how the AAdvantage Fund's performance has varied from year to year. The data
3
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shown below reflects the total return for the periods shown, reduced by the
actual expenses of the AAdvantage Fund. THE PERFORMANCE OF THE AADVANTAGE FUND
IS NOT THE PERFORMANCE OF THE FUND. Past performance is not necessarily
indicative of how the Fund will perform in the future. Investors may call
1-800-xxx-xxxx to obtain the Fund's current seven-day yield.
Total Return For the Calendar Year Ended 12/31 of each Year
89 9.47%
90 8.40%
91 6.77%
92 4.02%
93 3.28%
94 4.22%
95 6.04%
96 5.50%
97 5.64%
98 5.56%
The year-to-date total return of the AAdvantage Fund is X.XX% as of 9/30/99.
Highest Quarterly Return from 1/1/89 2nd Quarter 1989 2.45%
through 12/31/98
Lowest Quarterly Return from 1/1/89 through 2nd & 4th 0.80%
12/31/98 Quarter 1993
1st Quarter 1994
Average Annual Total Return
-------------------------------------
as of 12/31/98
-------------------------------------
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
AAdvantage Fund 5.56% 5.39% 5.87%
THE MANAGER
The Trust has retained AMR Investment Services, Inc. to serve as its
Manager. The Manager, located at 4333 Amon Carter Boulevard, Fort Worth, Texas
76155, is a wholly owned subsidiary of AMR Corporation, the parent company of
American Airlines, Inc. The Manager was organized in 1986 to provide investment
management, advisory, administrative and asset management consulting services.
As of June 30, 1999, the Manager had approximately $20.3 billion of assets under
management, including approximately $6.3 billion under active management and
$14.0 billion as named fiduciary or financial adviser. Of the total,
approximately $14.4 billion of assets are related to AMR Corporation.
The Manager provides or oversees all administrative, investment advisory
and portfolio management services to the Fund. The Manager develops the
investment program for the Fund and serves as the sole investment adviser to the
Fund. As compensation for providing management services, the Fund pays the
Manager an annualized advisory fee that is calculated and accrued daily, equal
to 0.10% of the net assets of the Fund.
The Manager also may receive up to 25% of the net annual interest income
or up to 25% of loan fees in regards to securities lending activities. However,
the Manager does not anticipate that the Fund will engage in securities lending
at this time. The Securities and Exchange Commission (SEC) has granted exemptive
relief that permits the Fund to invest cash collateral received from securities
lending transactions in shares of one or more private investment companies
managed by the Manager. Pursuant to exemptive relief from the SEC, the Fund may
also invest cash collateral received from securities lending transactions in
shares of one or more registered investment companies managed by the Manager.
The Manager has discretion to purchase and sell securities for the Fund in
accordance with the Fund's objectives, policies, and restrictions. Pursuant to
an exemptive order issued by the SEC, the Manager is permitted to enter into new
or modified investment advisory agreements with existing or new investment
advisers without approval of the Fund's shareholders, but subject to approval of
the Trust's Board of Trustees (Board). The Prospectus will be supplemented if
additional investment advisers are retained or the contract with any existing
investment adviser is terminated.
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VALUATION OF SHARES
The price of the Fund's shares is based on its net asset value (NAV) per
share. The Fund's NAV is computed by adding total assets, subtracting all of the
Fund's liabilities, and dividing the result by the total number of shares
outstanding. Securities held by the Fund are valued in accordance with the
amortized cost method, which is designed to enable the Fund to maintain a stable
NAV of $1.00 per share. In some cases, the price of debt securities is
determined using quotes obtained from brokers. Securities for which market
quotations are not readily available are valued at fair value, as determined in
good faith and pursuant to procedures approved by the Fund's Board of Trustees.
The Fund's NAV per share is determined as of the close of the New York Stock
Exchange (Exchange), generally 4:00 p.m. Eastern Time, on each day on which it
is open for business. The Fund is not open and no NAV is calculated on Columbus
Day and Veterans Day.
ABOUT YOUR INVESTMENT
PURCHASE AND REDEMPTION OF SHARES
ELIGIBILITY
Fund shares are offered without a sales charge to the tax-exempt retirement
and benefit plans of AMR Corporation and its affiliates and other institutional
investors who make an initial investment of at least $100 million, including:
o agents or fiduciaries acting on behalf of their clients (such as
employee benefit plans, trusts and other accounts for which a trust
company or financial advisor acts as agent or fiduciary);
o endowment funds and charitable foundations;
o employee welfare plans which are tax-exempt under Section 501(c)(9)
of the Internal Revenue Code of 1986, as amended (Code);
o qualified pension and profit sharing plans; and
o corporations.
The Manager may allow a reasonable period of time after opening an account
for an investor to meet the initial investment requirement. In addition, for
investors such as trust companies and financial advisors who make investments
for a group of clients, the minimum initial investment can be met through an
aggregated purchase order for more than one client.
PURCHASE POLICIES
No sales charges are assessed on the purchase or sale of Fund shares.
Shares of the Fund are offered and purchase orders accepted until 4:00 p.m.
Eastern Time (or the close of the Exchange, if earlier) on each day on which the
Exchange is open for trading. In addition, shares of the Fund are not offered
and orders are not accepted on Columbus Day and Veterans Day. Wire transfers to
purchase shares must be drawn in U.S. dollars on a U.S. bank.
OPENING AN ACCOUNT
A completed, signed application is required to open an account. You may
request an application form by calling (800) 967-9009.
Complete the application, sign it and:
Mail to: or Fax to:
American Select Funds (817) 967-0768 or (817) 931-4331
P.O. Box 619003, MD 5645
DFW Airport, TX 75261-9003
TO MAKE AN INITIAL PURCHASE
If your account has been established, you may call (800) 658-5811 to
purchase shares by wire. Send a bank wire to State Street Bank & Trust Co. with
these instructions:
o ABA# 0110-0002-8; AC-9905-342-3
o Attn: American Select Cash Reserve Fund
o account number and registration.
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TO ADD TO AN EXISTING ACCOUNT
Call (800) 658-5811 to purchase shares by wire. Send a bank wire to State
Street Bank & Trust Co. with these instructions:
o ABA# 0110-0002-8; AC-9905-342-3
o Attn: American Select Cash Reserve Fund
o shareholder's account number and registration.
REDEMPTION POLICIES
Shares of the Fund may be redeemed by telephone or mail on any day that
the Fund is open for business. For assistance with completing a redemption
request, please call (800) 658-5811. Proceeds from redemptions requested by 2:00
p.m. Eastern Time generally will be wired to shareholders on the same day. In
any event, proceeds from a redemption order will be transmitted to a shareholder
by no later than seven days after the receipt of a redemption request in good
order.
The Fund reserves the right to suspend redemptions or postpone the date of
payment (i) when the Exchange is closed (other than for customary weekend and
holiday closings); (ii) when trading on the Exchange is restricted; (iii) when
the SEC determines that an emergency exists so that disposal of the Fund's
investments or determination of its NAV is not reasonably practicable; or (iv)
by order of the SEC for protection of the Fund's shareholders.
Although the Fund intends to redeem shares in cash, the Fund reserves the
right to pay the redemption price in whole or in part by a distribution of
readily marketable securities held by the Portfolio. Unpaid dividends credited
to an account up to the date of redemption of all shares of the Fund generally
will be paid at the time of redemption.
TO REDEEM SHARES BY TELEPHONE
Call (800) 658-5811 to request a redemption. Proceeds from redemptions
placed by telephone will generally be transmitted by wire only, as instructed on
the application form.
TO REDEEM SHARES BY MAIL
Write a letter of instruction including the Fund name and Fund number, the
shareholder account number, the number of shares or dollar amount to be
redeemed, and the authorized signature(s) of all persons required to sign for
the account. A signature guarantee is required. Mail the letter to:
American Select Funds
P.O. Box 419643
Kansas City, MO 64141-6643
Other supporting documents may be required for estates, trusts,
guardianships, custodians, corporations, and welfare, pension and profit sharing
plans. Call (800) 658-5811 for instructions. Proceeds will only be mailed to the
account address of record or transmitted by wire to a commercial bank account
designated on the account application form.
GENERAL POLICIES
If a shareholder's account balance in the Fund falls below $x,xxx, the
shareholder may be asked to increase the balance. If the account balance remains
below $x,xxx after 45 days, the Fund reserves the right to close the account and
send the proceeds to the shareholder. The Fund also reserves the right to reject
any order for the purchase of shares and to limit or suspend, without prior
notice, the offering of shares.
The following policies apply to instructions you may provide to the Fund
by telephone:
o The Fund, its officers, trustees, directors, employees, or agents
are not responsible for the authenticity of instructions provided by
telephone, nor for any loss, liability, cost or expense incurred for
acting on them.
o The Fund employs procedures reasonably designed to confirm that
instructions communicated by telephone are genuine.
o Due to the volume of calls or other unusual circumstances, telephone
redemptions may be difficult to implement during certain time
periods.
6
<PAGE>
DISTRIBUTIONS AND TAXES
The Fund intends to distribute most or all of its net earnings in the form
of monthly dividends from net investment income and distributions of realized
net capital gains. Usually, any dividends and distributions of net realized
gains are taxable events. Unless the account application instructs otherwise,
distributions will be reinvested in additional Fund shares. Distributions are
paid to shareholders on the first business day after the month ends.
This is only a summary of some of the important income tax considerations
that may affect Fund shareholders. Shareholders should consult their tax adviser
regarding specific questions as to the effect of federal, state or local income
taxes on an investment in the Fund.
ADDITIONAL INFORMATION
DISTRIBUTION OF TRUST SHARES
The Trust does not incur any direct distribution expenses related to the
Fund. However, the Trust has adopted a Distribution Plan in accordance with Rule
12b-1 under the Investment Company Act of 1940, which authorizes the use of any
fees received by the Manager in accordance with the Management and
Administrative Services Agreement to be used for the sale and distribution of
Fund shares.
MASTER-FEEDER STRUCTURE
The Fund operates under a master-feeder structure. This means that the
Fund is a "feeder" fund that invests all of its investable assets in a "master"
fund with the same investment objective. The "master" fund purchases securities
for investment. The master-feeder structure works as follows:
-----------------------
Investor
-----------------------
PURCHASES SHARES OF
-----------------------
Feeder Fund
-----------------------
WHICH INVESTS IN
-----------------------
Master Fund
-----------------------
WHICH BUYS
-----------------------
Investment Securities
-----------------------
The Fund can withdraw its investment in the Portfolio at any time if the
Board determines that it is in the best interest of the Fund and its
shareholders to do so. If this happens, the Fund's assets will be invested
according to the investment policies and restrictions described in this
Prospectus.
YEAR 2000
The Fund could be affected adversely if the computer systems used by the
Manager, the Fund's other service providers, or companies in which the Fund
invests do not properly process and calculate information that relates to dates
beginning on January 1, 2000 and beyond. Due to the Fund's reliance on various
service providers to perform essential functions, the Fund could have difficulty
calculating its NAV, processing orders for share redemptions and delivering
account statements and other information to shareholders. The Manager has taken
steps that it believes are reasonably designed to address the potential failure
of computer systems used by the Manager and the Fund's service providers to
address the Year 2000 issue. There can be no assurance that the steps taken by
the Manager will be sufficient to avoid any adverse impact.
In evaluating current and potential portfolio positions, Year 2000 is one
of the factors that the Manager takes into consideration. The Manager will rely
upon public filings and other statements made by companies regarding their Year
2000 readiness. Issuers in countries outside of the U.S. may not be required to
make the level of disclosure regarding Year 2000 readiness that is required in
the U.S. If the value of the Fund's investment is adversely affected by a Year
2000 problem, the NAV of the Fund may be affected as well.
7
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FINANCIAL HIGHLIGHTS
Financial highlights are not available for the Fund, because as of the
date of this Prospectus, it had not commenced active operations.
8
<PAGE>
ADDITIONAL INFORMATION
Additional information about the Fund and its investment policies is found in
the Statement of Additional Information ("SAI"). The SAI is incorporated in this
Prospectus by reference (it is legally part of this Prospectus). A current SAI
is on file with the Securities and Exchange Commission (SEC). Request a free
copy of this document by calling (800) 967-9009.
To obtain more information about the Fund:
BY TELEPHONE:
Call (800) 967-9009
BY MAIL:
American Select Funds
P.O. Box 619003, MD5645
DFW Airport, TX 75261-9003
Copies of the SAI may also be obtained from the SEC Public Reference Room in
Washington, D.C. The Public Reference Room can be reached at (800) 732-0330 or
by mailing a request, including a duplicating fee to: SEC's Public Reference
Section, 450 5th Street NW, Washington, D.C. 20549-6009.
FUND SERVICE PROVIDERS
CUSTODIAN TRANSFER AGENT
--------- --------------
State Street Bank and Trust National Financial Data
Company Services
Boston, Massachusetts Kansas City, Missouri
INDEPENDENT AUDITORS DISTRIBUTOR
-------------------- -----------
Ernst & Young LLP SWS Financial Services, Inc.
Dallas, Texas Dallas, Texas
[AMERICAN SELECT FUNDS LOGO]
SEC File Number 811-XXXX
American Airlines is not responsible for investments made in the American Select
Funds. American Select Funds is a service mark of AMR Corporation. American
Select Cash Reserve Fund is a service mark of AMR Investment Services, Inc.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
AMERICAN SELECT CASH RESERVE FUND(SERVICEMARK)
JANUARY 1, 2000
The American Select Cash Reserve Fund(SERVICEMARK) (the "Fund") is a
separate investment portfolio of the American Select Funds (the "Select Trust").
The Select Trust is a no load, open-end, diversified management investment
company. The Trust was organized as a Massachusetts business trust on August 18,
1999.
The Fund seeks its investment objective by investing all of its investable
assets in the AMR Investment Services Money Market Portfolio (the "Portfolio")
of the AMR Investment Services Trust ("AMR Trust") that has an identical
investment objective to the Fund.
This Statement of Additional Information ("SAI") should be read in
conjunction with the Fund's prospectus dated January 1, 2000 ("Prospectus"), a
copy of which may be obtained without charge by calling (800) 967-9009. This SAI
is not a prospectus and is authorized for distribution to prospective investors
only if preceded or accompanied by a current Prospectus.
TABLE OF CONTENTS
Non-Principal Investment Strategies and Risks..................................2
Investment Restrictions........................................................2
Trustees and Officers of the Trust and the AMR Trust...........................4
Control Persons and 5% Shareholders............................................6
Management, Administrative Services and Distribution Fees......................7
Other Service Providers........................................................7
Redemptions in Kind............................................................7
Net Asset Value................................................................7
Tax Information................................................................8
Yield and Total Return Quotations..............................................9
Description of the Trust......................................................10
Other Information.............................................................10
Financial Statements..........................................................16
<PAGE>
NON-PRINCIPAL INVESTMENT STRATEGIES AND RISKS
The Fund may:
1. Invest in other investment companies to the extent permitted by the
Investment Company Act of 1940 ("1940 Act") or exemptive relief granted by
the Securities and Exchange Commission ("SEC").
2. Loan securities to broker-dealers or other institutional investors.
Securities loans will not be made if, as a result, the aggregate amount of
all outstanding securities loans by the Portfolio exceeds 33 1/3% of its
total assets (including the market value of collateral received). For
purposes of complying with the Portfolio's investment policies and
restrictions, collateral received in connection with securities loans is
deemed an asset of the Portfolio to the extent required by law. AMR
Investment Services, Inc. (the "Manager") receives compensation for
administrative and oversight functions with respect to securities lending.
The amount of such compensation depends on the income generated by the
loan of the securities. The Portfolio continues to receive interest on the
securities loaned and simultaneously earns either interest on the
investment of the cash collateral or fee income if the loan is otherwise
collateralized.
3. Enter into repurchase agreements. A repurchase agreement is an
agreement under which securities are acquired by the Portfolio from a
securities dealer or bank subject to resale at an agreed upon price on a
later date. The Portfolio bears a risk of loss in the event that the other
party to a repurchase agreement defaults on its obligations and the
Portfolio is delayed or prevented from exercising its rights to dispose of
the collateral securities. However, the Manager attempts to minimize this
risk by entering into repurchase agreements only with financial
institutions which are deemed to be of good financial standing and which
have been approved by the AMR Trust's Board of Trustees ("AMR Trust
Board").
4. Purchase securities in private placement offerings made in reliance on
the "private placement" exemption from registration afforded by Section
4(2) of the Securities Act of 1933 ("1933 Act"), and resold to qualified
institutional buyers under Rule 144A under the 1933 Act ("Section 4(2)
securities"). The Portfolio will not invest more than 10% of its
respective net assets in Section 4(2) securities and illiquid securities
unless the applicable investment adviser determines, by continuous
reference to the appropriate trading markets and pursuant to guidelines
approved by the AMR Trust Board, that any Section 4(2) securities held by
the Portfolio in excess of this level are at all times liquid.
INVESTMENT RESTRICTIONS
The Fund has the following fundamental investment policy that enables it to
invest in the Portfolio:
Notwithstanding any other limitation, the Fund may invest all of its
investable assets in an open-end management investment company with
substantially the same investment objectives, policies and limitations
as the Fund. For this purpose, "all of the Fund's investable assets"
means that the only investment securities that will be held by the Fund
will be the Fund's interest in the investment company.
All other fundamental investment policies and the non-fundamental policies
of the Fund and the Portfolio are identical. Therefore, although the following
discusses the investment policies of the Portfolio and the AMR Trust Board, it
applies equally to the Fund and the Select Trust's Board of Trustees ("Select
Trust Board").
In addition to the investment limitations noted in the Prospectus, the
following seven restrictions have been adopted by the Portfolio and may be
changed only by the majority vote of the Portfolio's outstanding interests.
"Majority of the outstanding voting securities" under the Investment Company Act
of 1940, as amended (the "1940 Act"), and as used herein means, with respect to
the Portfolio, the lesser of (a) 67% of the interests of the Portfolio present
at the meeting if the holders of more than 50% of the interests are present and
represented at the interest holders' meeting or (b) more than 50% of the
interests of the Portfolio. Whenever the Fund is requested to vote on a change
in the investment restrictions of the Portfolio, the Fund will hold a meeting of
its shareholders and will cast its votes as instructed by its shareholders. The
percentage of the Fund's votes representing the shareholders not voting will be
2
<PAGE>
voted by the Select Trust Board in the same proportion as those Fund
shareholders who do, in fact, vote.
The Portfolio may not:
1. Purchase or sell real estate or real estate limited partnership
interests, provided, however, that the Portfolio may invest in securities
secured by real estate or interests therein or issued by companies which
invest in real estate or interests therein when consistent with the other
policies and limitations described in the Prospectus.
2. Purchase or sell commodities (including direct interests and/or leases
in oil, gas or minerals) or commodities contracts, except with respect to
forward foreign currency exchange contracts, foreign currency futures
contracts and when-issued securities when consistent with the other
policies and limitations described in the Prospectus.
3. Engage in the business of underwriting securities issued by others
except to the extent that, in connection with the disposition of
securities, the Portfolio may be deemed an underwriter under federal
securities law.
4. Make loans to any person or firm, provided, however, that the making of
a loan shall not be construed to include (i) the acquisition for investment
of bonds, debentures, notes or other evidences of indebtedness of any
corporation or government which are publicly distributed or (ii) the entry
into repurchase agreements and further provided, however, that the
Portfolio may lend its investment securities to broker-dealers or other
institutional investors in accordance with the guidelines stated in the
Prospectus.
5. Purchase from or sell portfolio securities to its officers, Trustees or
other "interested persons" of the AMR Trust, as defined in the 1940 Act,
including its investment advisers and their affiliates, except as permitted
by the 1940 Act and exemptive rules or orders thereunder.
6. Issue senior securities except that the Portfolio may engage in
when-issued and forward commitment transactions.
7. Borrow money, except from banks or through reverse repurchase agreements
for temporary purposes in an aggregate amount not to exceed 10% of the
value of its total assets at the time of borrowing. In addition, although
not a fundamental policy, the Portfolio intends to repay any money borrowed
before any additional portfolio securities are purchased. See "Other
Information" for a further description regarding reverse repurchase
agreements.
8. Invest more than 5% of its total assets (taken at market value) in
securities of any one issuer, other than obligations issued by the U.S.
Government, its agencies and instrumentalities, or purchase more than 10%
of the voting securities of any one issuer, with respect to 75% of the
Portfolio's total assets.
9. Invest more than 25% of its total assets in the securities of companies
primarily engaged in any one industry, provided that: (i) this limitation
does not apply to obligations issued or guaranteed by the U.S. Government,
its agencies and instrumentalities; (ii) municipalities and their agencies
and authorities are not deemed to be industries; and (iii) financial
service companies are classified according to the end users of their
services (for example, automobile finance, bank finance, and diversified
finance will be considered separate industries).
The following non-fundamental investment restrictions may be changed with
respect to the Fund by a vote of a majority of the Select Trust Board or, with
respect to the Portfolio, by a vote of a majority of the AMR Trust Board. The
Portfolio may not:
1. Invest more than 15% of its net assets in illiquid securities,
including time deposits and repurchase agreements that mature in more than
seven days; or
3
<PAGE>
2. Purchase securities on margin, effect short sales (except that the
Portfolio may obtain such short term credits as may be necessary for the
clearance of purchases or sales of securities) or purchase or sell call
options or engage in the writing of such options.
The Portfolio may invest up to 10% of its total assets in the securities
of other investment companies to the extent permitted by law. The Portfolio may
incur duplicate advisory or management fees when investing in another mutual
fund.
TRUSTEES AND OFFICERS OF THE TRUST AND THE AMR TRUST
The Select Trust Board and the AMR Trust Board provide broad supervision
over the Select Trust's affairs. The Manager is responsible for the management
and the administration of the Select Trust's assets, and the Select Trust's
officers are responsible for the Select Trust's operations. The Trustees and
officers of the Select Trust and the AMR Trust are listed below, together with
their principal occupations during the past five years. Unless otherwise
indicated, the address of each person listed below is 4333 Amon Carter
Boulevard, MD 5645, Fort Worth, Texas 76155.
<TABLE>
<CAPTION>
POSITION
WITH
NAME, AGE AND ADDRESS THE TRUSTS PRINCIPAL OCCUPATION DURING PAST 5 YEARS
- --------------------- ---------- ----------------------------------------
<S> <C> <C>
William F. Quinn* (51) Trustee and President, AMR Investment Services, Inc.
President (1986-Present); Chairman, American
Airlines Employees Federal Credit
Union (October 1989-Present); Trustee,
American Performance Funds
(1990-1994); Director, Crescent Real
Estate Equities, Inc. (1994-Present);
Trustee, American AAdvantage Funds
(1987-Present); Trustee, American
AAdvantage Mileage Funds
(1995-Present); Trustee, American
Select Funds (1999-Present).
Alan D. Feld (63) Trustee Partner, Akin, Gump, Strauss, Hauer &
1700 Pacific Avenue Feld, LLP (1960-Present)#; Director,
Suite 4100 Clear Channel Communications
Dallas, Texas 75201 (1984-Present); Director, CenterPoint
Properties, Inc. (1994-Present); Trustee,
American AAdvantage Funds (1996-
Present); Trustee, American AAdvantage
Mileage Funds (1996-Present); Trustee,
American Select Funds (1999-Present).
Ben J. Fortson (67) Trustee President and CEO, Fortson Oil Company
301 Commerce Street (1958-Present); Director, Kimbell Art
Suite 3301 Foundation (1964-Present); Director,
Fort Worth, Texas 76102 Burnett Foundation (1987-Present);
Honorary Trustee, Texas Christian
University (1986-Present); Trustee,
American AAdvantage Funds
(1996-Present); Trustee, American
AAdvantage Mileage Funds
(1996-Present); Trustee, American
Select Funds (1999-Present).
4
<PAGE>
POSITION
WITH
NAME, AGE AND ADDRESS THE TRUSTS PRINCIPAL OCCUPATION DURING PAST 5 YEARS
- --------------------- ---------- ----------------------------------------
John S. Justin (82) Trustee Chairman (1969-Present), Chief Executive
2821 West Seventh Street Officer (1969-1999), Justin Industries,
Fort Worth, Texas 76107 Inc. (a diversified holding company);
Executive Board Member, Blue
Cross/Blue Shield of Texas
(1985-Present); Board Member, Zale
Lipshy Hospital (June 1993-Present);
Trustee, Texas Christian University
(1980-Present); Director and Executive
Board Member, Moncrief Radiation
Center (1985-Present); Director, Texas
New Mexico Enterprises (1984-1993);
Director, Texas New Mexico Power
Company (1979-1993); Trustee, American
AAdvantage Funds (1989-Present);
Trustee, American AAdvantage Mileage
Funds (1995-Present); Trustee,
American Select Funds (1999-Present).
Stephen D. O'Sullivan* Trustee Consultant (1994-Present); Vice President
(64) and Controller, American Airlines, Inc.
(1985-1994); Trustee, American AAdvantage
Funds (1987-Present); Trustee, American
AAdvantage Mileage Funds (1995-Present);
Trustee, American Select Funds (1999-Present).
Roger T. Staubach (57) Trustee Chairman of the Board and Chief Executive
15601 Dallas Parkway, Officer of The Staubach Company (a
Suite 400 commercial real estate company)
Dallas, TX 75001 (1982-Present); Director, Brinker
International (1993-Present);
Director, International Home Foods,
Inc. (1997-Present); Trustee,
Institute for Aerobics Research;
Member, Executive Council,
Daytop/Dallas; Member, National Board
of Governors, United Way of America;
former quarterback of the Dallas
Cowboys professional football team;
Trustee, American AAdvantage Funds
(1995-Present); Trustee, American
AAdvantage Mileage Funds
(1995-Present); Trustee, American
Select Funds (1999-Present).
Kneeland Youngblood (44) Trustee Managing Partner, Pharos Capital Group,
100 Crescent Court L.L.C. (a private equity firm)
Suite 1740 (1998-Present); Trustee, Teachers
Dallas, Texas 75201 Retirement System of Texas (1993-Present);
Director, United States Enrichment
Corporation (1993-1998), Director,
Just For the Kids (1995-Present);
Director, Starwood Financial Trust
(1998-Present); Member, Council on
Foreign Relations (1995-Present);
Trustee, American AAdvantage Funds
(1996-Present); Trustee, American
AAdvantage Mileage Funds
(1996-Present); Trustee, American
Select Funds (1999-Present).
Nancy A. Eckl (37) Vice Vice President, AMR Investment Services,
President Inc. (December 1990-Present).
Michael W. Fields (45) Vice Vice President, AMR Investment Services,
President Inc. (August 1988-Present).
Barry Y. Greenberg (36) Vice Vice President, Legal and Compliance, AMR
President Investment Services, Inc. (1995-Present);
and Branch Chief (1992-1995) and Staff
Assistant Attorney (1988-1992), Securities and
Secretary Exchange Commission.
5
<PAGE>
POSITION
WITH
NAME, AGE AND ADDRESS THE TRUSTS PRINCIPAL OCCUPATION DURING PAST 5 YEARS
- --------------------- ---------- ----------------------------------------
Rebecca L. Harris (33) Treasurer Vice President, Finance (1995-Present),
Controller (1991-1995), AMR Investment
Services, Inc.
John B. Roberson (41) Vice Vice President, AMR Investments Services,
President Inc. (1991-Present).
Robert J. Zutz (46) Secretary Partner, Kirkpatrick & Lockhart LLP (law
1800 Massachusetts Ave. NW firm).
Washington, D.C. 20036
</TABLE>
* Messrs. Quinn and O'Sullivan are deemed to be "interested persons" of the
Select Trust and the AMR Trust as defined by the 1940 Act.
# The law firm of Akin, Gump, Strauss, Hauer & Feld LLP ("Akin, Gump") provides
legal services to American Airlines, Inc., an affiliate of the Manager. Mr.
Feld has advised the Select Trust that he has had no material involvement in
the services provided by Akin, Gump to American Airlines, Inc. and that he
has received no material benefit in connection with these services. Akin,
Gump does not provide legal services to the Manager or AMR Corporation.
All Trustees and officers as a group own less than 1% of the outstanding
shares of the Fund.
As compensation for their services to the Select Trust, the AMR Trust, the
American AAdvantage Funds and the American AAdvantage Mileage Funds
(collectively, the "Trusts"), the Independent Trustees and their spouses receive
free air travel from American Airlines, Inc., an affiliate of the Manager. The
Trusts pay American Airlines, Inc. any service charges incurred in providing
free airline travel to the Trustees. The Trusts also compensate each Trustee
with payments in an amount equal to the Trustees' income tax on the value of
this free airline travel. Mr. O'Sullivan, as a retiree of American Airlines,
Inc., already receives flight benefits. The Trusts will compensate Mr.
O'Sullivan up to $10,000 annually to cover his personal flight service charges
and the charges for his three adult children, as well as any income tax charged
on the value of these flight benefits. Trustees will also be reimbursed for any
expenses incurred in attending Board meetings. The Select Trust and the AMR
Trust each pay its proportionate share of the Trustees' compensation. The
amounts in the table are estimated based on compensation to Trustees from the
AMR Trust for the fiscal year ended October 31, 1998. Trustees' usage of the air
travel benefits may vary from historical levels.
<TABLE>
<CAPTION>
Estimated
Pension or Estimated Estimated
Estimated Retirement Annual Total
Aggrgate Benefits Benefits Compensation
Compensation Accrued as Part Upon From the
Name of Trustee From the Fund of the Fund's Expenses Retirement Trusts (30 Funds)
- --------------- ------------- ---------------------- ---------- -----------------
<S> <C> <C> <C> <C>
William F. Quinn $0 $0 $0 $0
Alan D. Feld $1,850 $0 $0 $35,600
Ben J. Fortson $1,820 $0 $0 $35,000
John S. Justin $85 $0 $0 $1,600
Stephen D. O'Sullivan $300 $0 $0 $5,500
Roger T. Staubach $900 $0 $0 $17,500
Kneeland Youngblood $4,150 $0 $0 $79,500
</TABLE>
CONTROL PERSONS AND 5% SHAREHOLDERS
The Manager is deemed to control the Fund by virtue of its ownership of
more than 25% of the outstanding shares of the Fund as of January 1, 2000.
6
<PAGE>
MANAGEMENT, ADMINISTRATIVE SERVICES AND DISTRIBUTION FEES
The Manager is paid a management fee as compensation for providing the
Select Trust and the AMR Trust with advisory and asset allocation services.
Pursuant to management and administrative services agreements, the Manager
provides the Select Trust and the AMR Trust with office space, office equipment
and personnel necessary to manage and administer the Trusts' operations. This
includes:
o complying with reporting requirements;
o corresponding with shareholders;
o maintaining internal bookkeeping, accounting and auditing and
records; and
o supervising the provision of services to the Trusts by third parties.
Since the Select Trust began operations on January 1, 2000, no management
fees have been paid as of the date of this SAI. The Manager has contractually
agreed to waive a portion of its management fees through December 31, 2000, to
the extent that the Fund's total annual operating expenses exceed 0.12%.
In addition to the management fee, the Manager is paid an administrative
services fee for providing administrative and management services (other than
investment advisory services) to the Fund. Because the Fund has only been in
operation since January 1, 2000, no administrative services fees have been paid
as of the date of this SAI.
The Manager receives compensation for administrative and oversight
functions with respect to securities lending of the Portfolio. Since the Fund
began operations on January 1, 2000, no securities lending fees for the Fund
have been paid to the Manager as of the date of this SAI.
SWS Financial Services, located at 7001 Preston Road, Dallas, Texas 75205,
is the distributor and principal underwriter of the Fund's shares, and as such,
receives an annualized fee of $50,000 from the Manager for distributing shares
of the Select Trust, the American AAdvantage Funds and the American AAdvantage
Mileage Funds.
OTHER SERVICE PROVIDERS
The transfer agent for the Select Trust is State Street Bank & Company
("State Street"), Boston, Massachusetts, who provides transfer agency services
to Fund shareholders directly and through its affiliate National Financial Data
Services, Kansas City, Missouri. State Street also serves as the custodian for
the Portfolio and the Fund. The independent auditor for the Fund and the AMR
Trust is Ernst & Young LLP, Dallas, Texas.
REDEMPTIONS IN KIND
Although the Fund intends to redeem shares in cash, it reserves the right
to pay the redemption price in whole or in part by a distribution of readily
marketable securities held by the Portfolio. However, shareholders always will
be entitled to redeem shares for cash up to the lesser of $250,000 or 1% of the
Fund's net asset value during any 90-day period. Redemption in kind is not as
liquid as a cash redemption. In addition, if redemption is made in kind,
shareholders who receive securities and sell them could receive less than the
redemption value of their securities and could incur certain transactions costs.
NET ASSET VALUE
It is the policy of the Fund to attempt to maintain a constant price per
share of $1.00. There can be no assurance that a $1.00 net asset value per share
will be maintained. The portfolio instruments held by the Portfolio are valued
based on the amortized cost valuation technique pursuant to Rule 2a-7 under the
1940 Act. This involves valuing an instrument at its cost and thereafter
assuming a constant amortization to maturity of any discount or premium, even
though the portfolio security may increase or decrease in market value. Such
market fluctuations are generally in response to changes in interest rates. Use
of the amortized cost valuation method requires the Portfolio to purchase
instruments having remaining maturities of 397 days or less, to maintain a
dollar-weighted average portfolio maturity of 90 days or less, and to invest
only in securities determined by the AMR Trust Board to be of high quality with
7
<PAGE>
minimal credit risks. The Portfolio may invest in issuers or instruments that at
the time of purchase have received the highest short-term rating by two Rating
Organizations, such as "D-1" by Duff & Phelps and "F-1" by Fitch IBCA, Inc., and
have received the next highest short-term rating by other Rating Organizations,
such as "A-2" by Standard & Poors and "P-2" by Moody's Investors Service, Inc.
See "Ratings of Municipal Obligations" and "Ratings of Short-Term Obligations"
for further information concerning ratings.
TAX INFORMATION
TAXATION OF THE FUND
To qualify for treatment as a regulated investment company ("RIC") under
the Internal Revenue Code of 1986, as amended ("Code"), the Fund (which is
treated as a separate corporation for these purposes) must, among other
requirements:
o Derive at least 90% of its gross income each taxable year from
dividends, interest, payments with respect to securities loans and gains
from the sale or other disposition of securities or certain other
income;
o Diversify its investments in securities within certain statutory
limits ("Diversification Requirement"); and
o Distribute annually to its shareholders at least 90% of its
investment company taxable income (generally, taxable net investment
income plus net short-term capital gain) ("Distribution Requirement").
The Fund, as an investor in the Portfolio, is deemed to own a proportionate
share of the Portfolio's assets and to earn the income on that share for
purposes of determining whether the Fund satisfies the Income and
Diversification Requirements. If the Fund failed to qualify as a RIC for any
taxable year, it would be taxed on the full amount of its taxable income for
that year without being able to deduct the distributions it makes to its
shareholders and the shareholders would treat all those distributions as
dividends (that is, ordinary income) to the extent of the Fund's earnings and
profits.
TAXATION OF THE PORTFOLIO
The Portfolio should be classified as a separate partnership for federal
income tax purposes and is not a "publicly traded partnership." As a result, the
Portfolio is not or should not be subject to federal income tax; instead, each
investor in the Portfolio, such as the Fund, is required to take into account in
determining its federal income tax liability its share of the Portfolio's
income, gains, losses, deductions, credits and tax preference items, without
regard to whether it has received any cash distributions from the Portfolio.
Because, as noted above, the Fund is deemed to own a proportionate share of
the Portfolio's assets and to earn a proportionate share of the Portfolio's
income for purposes of determining whether the Fund satisfies the requirements
to qualify as a RIC, the Portfolio intends to conduct its operations so that the
Fund will be able to satisfy all those requirements.
Distributions to the Fund from the Portfolio (whether pursuant to a partial
or complete withdrawal or otherwise) will not result in the Fund's recognition
of any gain or loss for federal income tax purposes, except that (1) gain will
be recognized to the extent any cash that is distributed exceeds the Fund's
basis for its interest in the Portfolio before the distribution, (2) income or
gain will be recognized if the distribution is in liquidation of the Fund's
entire interest in the Portfolio and includes a disproportionate share of any
unrealized receivables held by the Portfolio and (3) loss will be recognized if
a liquidation distribution consists solely of cash and/or unrealized
receivables. The Fund's basis for its interest in the Portfolio generally will
equal the amount of cash and the basis of any property the Fund invests in the
Portfolio, increased by the Fund's share of the Portfolio's net income and gains
and decreased by (a) the amount of cash and the basis of any property the
Portfolio distributes to the Fund and (b) the Fund's share of the Portfolio's
losses.
This is only a summary of some of the important federal tax considerations
affecting the Fund and its shareholders and is not intended as a substitute for
8
<PAGE>
careful tax planning. Accordingly, prospective investors are advised to consult
their own tax advisers for more detailed information regarding the above and for
information regarding federal, state, local and foreign taxes.
YIELD AND TOTAL RETURN QUOTATIONS
A quotation of yield on shares of the Fund may appear from time to time in
advertisements and in communications to shareholders and others. Quotations of
yields are indicative of yields for the limited historical period used but not
for the future. Yield will vary as interest rates and other conditions change.
Yield also depends on the quality, length of maturity and type of instruments
invested in by the Fund, and the Fund's operating expenses. A comparison of the
quoted yields offered for various investments is valid only if yields are
calculated in the same manner. In addition, other similar investment companies
may have more or less risk due to differences in the quality or maturity of
securities held.
The yield of the Fund may be calculated in one of two ways:
(1) Current Yield--the net average annualized return without compounding
accrued interest income. For a 7-day current yield, this is computed by
dividing the net change in value over a 7 calendar-day period of a
hypothetical account having one share at the beginning of a 7 calendar-day
period by the value of the account at the beginning of this period to
determine the "base period return". The quotient is multiplied by 365
divided by 7 and stated to two decimal places. A daily current yield is
calculated by multiplying the net change in value over one day by 365 and
stating it to two decimal places. Income other than investment income and
capital changes, such as realized gains and losses from the sale of
securities and unrealized appreciation and depreciation, are excluded in
calculating the net change in value of an account. However, this
calculation includes the aggregate fees and other expenses that are charged
to all shareholder accounts in the Fund. In determining the net change in
value of a hypothetical account, this value is adjusted to reflect the
value of any additional shares purchased with dividends from the original
share and dividends declared on both the original share and any such
additional shares.
(2) Effective Yield--the net average annualized return as computed by
compounding accrued interest income. In determining the 7-day effective
yield, the Fund will compute the "base period return" in the same manner
used to compute the "current yield" over a 7 calendar-day period as
described above. One is then added to the base period return and the sum is
raised to the 365/7 power. One is subtracted from the result, according to
the following formula:
EFFECTIVE YIELD = [ (BASE PERIOD RETURN + 1)365/7 ] - 1
Since the Fund began operations on January 1, 2000, its current and
effective yields were not available as of the date of this SAI.
The advertised total return for the Fund would be calculated by equating an
initial amount invested in the Fund to the ending redeemable value, according to
the following formula:
P(1 + T)N= ERV
where "P" is a hypothetical initial payment of $1,000; "T" is the average annual
total return for the Fund; "n" is the number of years involved; and "ERV" is the
ending redeemable value of a hypothetical $1,000 payment made in the Fund at the
beginning of the investment period covered.
The Fund also may use "aggregate" total return figures for various periods,
which represent the cumulative change in value of an investment in a Fund for
the specific period. Such total returns reflect changes in share prices of a
Fund and assume reinvestment of dividends and distributions.
In reports or other communications to shareholders or in advertising
material, the Fund may from time to time compare its performance with that of
other mutual funds in rankings prepared by Lipper Analytical Services, Inc.,
Morningstar, Inc., IBC Financial Data, Inc. and other similar independent
services which monitor the performance of mutual funds or publications such as
the "New York Times," "Barrons" and the "Wall Street Journal." The Fund also may
compare its performance with various indices prepared by independent services
such as Merrill Lynch or Lehman Brothers or to unmanaged indices that may assume
9
<PAGE>
reinvestment of dividends but generally do not reflect deductions for
administrative and management costs.
Advertisements for the Fund may mention that the Fund offer a variety of
investment options. They also may compare the Fund to federally insured
investments such as bank certificates of deposit and credit union deposits,
including the long-term effects of inflation on these types of investments.
Advertisements also may compare the historical rate of return of different types
of investments.
Listings for the Fund may be found in newspapers under the heading "Amer
Select".
DESCRIPTION OF THE TRUST
The Select Trust, organized on August 18, 1999, is an entity of the type
commonly known as a "Massachusetts business trust." Under Massachusetts law,
shareholders of such a trust may, under certain circumstances, be held
personally liable for its obligations. However, the Trust's Declaration of Trust
contains an express disclaimer of shareholder liability for acts or obligations
of the Trust and provides for indemnification and reimbursement of expenses out
of Trust property for any shareholder held personally liable for the obligations
of the Trust. The Declaration of Trust also provides that the Trust may maintain
appropriate insurance (for example, fidelity bonding) for the protection of the
Trust, its shareholders, Trustees, officers, employees and agents to cover
possible tort and other liabilities. Thus, the risk of a shareholder incurring
financial loss due to shareholder liability is limited to circumstances in which
both inadequate insurance existed and the Trust itself was unable to meet its
obligations. The Trust has not engaged in any other business.
OTHER INFORMATION
ASSET-BACKED SECURITIES-Through the use of trusts and special purpose
subsidiaries, various types of assets (primarily home equity loans, automobile
and credit card receivables, other types of receivables/assets as well as
purchase contracts, financing leases and sales agreements entered into by
municipalities) are securitized in pass-through structures similar to
Mortgage-Backed Securities, as described below. The Portfolio is permitted to
invest in asset-backed securities, subject to the Portfolio's rating and quality
requirements.
BANK DEPOSIT NOTES-Bank deposit notes are obligations of a bank, rather
than bank holding company corporate debt. The only structural difference between
bank deposit notes and certificates of deposit is that interest on bank deposit
notes is calculated on a 30/360 basis as are corporate notes/bonds. Similar to
certificates of deposit, deposit notes represent bank level investments and,
therefore, are senior to all holding company corporate debt.
BANKERS' ACCEPTANCES-Bankers' acceptances are short-term credit instruments
designed to enable businesses to obtain funds to finance commercial
transactions. Generally, an acceptance is a time draft drawn on a bank by an
exporter or an importer to obtain a stated amount of funds to pay for specific
merchandise. The draft is then "accepted" by a bank that, in effect,
unconditionally guarantees to pay the face value of the instrument on its
maturity date. The acceptance may then be held by the accepting bank as an
earning asset or it may be sold in the secondary market at the going rate of
discount for a specific maturity. Although maturities for acceptances can be as
long as 270 days, most acceptances have maturities of six months or less.
CASH EQUIVALENTS-Cash equivalents include certificates of deposit, bearer
deposit notes, bankers' acceptances, government obligations, commercial paper,
short-term corporate debt securities and repurchase agreements.
CERTIFICATES OF DEPOSIT-Certificates of deposit are issued against funds
deposited in an eligible bank (including its domestic and foreign branches,
subsidiaries and agencies), are for a definite period of time, earn a specified
rate of return and are normally negotiable.
COMMERCIAL PAPER-Commercial paper refers to promissory notes representing
an unsecured debt of a corporation or finance company with a fixed maturity of
no more than 270 days. A variable amount master demand note (which is a type of
commercial paper) represents a direct borrowing arrangement involving
10
<PAGE>
periodically fluctuating rates of interest under a letter agreement between a
commercial paper issuer and an institutional lender pursuant to which the lender
may determine to invest varying amounts.
DERIVATIVES-Generally, a derivative is a financial arrangement, the value
of which is based on, or "derived" from, a traditional security, asset or market
index. Some "derivatives" such as mortgage-related and other asset-backed
securities are in many respects like any other investment, although they may be
more volatile or less liquid than more traditional debt securities. There are,
in fact, many different types of derivatives and many different ways to use
them. There are a range of risks associated with those uses.
EURODOLLAR AND YANKEEDOLLAR OBLIGATIONS-Eurodollar obligations are U.S.
dollar obligations issued outside the United States by domestic or foreign
entities, while Yankeedollar obligations are U.S. dollar obligations issued
inside the United States by foreign entities. There is generally less publicly
available information about foreign issuers and there may be less governmental
regulation and supervision of foreign stock exchanges, brokers and listed
companies. Foreign issuers may use different accounting and financial standards,
and the addition of foreign governmental restrictions may affect adversely the
payment of principal and interest on foreign investments. In addition, not all
foreign branches of United States banks are supervised or examined by regulatory
authorities as are United States banks, and such branches may not be subject to
reserve requirements.
FULL FAITH AND CREDIT OBLIGATIONS OF THE U.S. GOVERNMENT-Securities issued
or guaranteed by the U.S. Treasury, backed by the full taxing power of the U.S.
Government or the right of the issuer to borrow from the U.S. Treasury.
ILLIQUID SECURITIES-Historically, illiquid securities have included
securities subject to contractual or legal restrictions on resale because they
have not been registered under the 1933 Act, securities that are otherwise not
readily marketable and repurchase agreements having a remaining maturity of
longer than seven calendar days. Securities that have not been registered under
the 1933 Act are referred to as private placements or restricted securities and
are purchased directly from the issuer or in the secondary market. Mutual funds
do not typically hold a significant amount of these restricted or other illiquid
securities because of the potential for delays on resale and uncertainty in
valuation. Limitations on resale may have an adverse effect on the marketability
of portfolio securities and a mutual fund might be unable to dispose of
restricted or other illiquid securities promptly or at reasonable prices and
might thereby experience difficulty satisfying redemptions within seven calendar
days. A mutual fund also might have to register such restricted securities in
order to dispose of them resulting in additional expense and delay. Adverse
market conditions could impede such a public offering of securities.
In recent years, however, a large institutional market has developed for
certain securities that are not registered under the 1933 Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. However, the
fact that there are contractual or legal restrictions on resale of such
investments to the general public or to certain institutions may not be
indicative of their liquidity.
LOAN PARTICIPATION INTERESTS-Loan participation interests represent
interests in bank loans made to corporations. The contractual arrangement with
the bank transfers the cash stream of the underlying bank loan to the
participating investor. Because the issuing bank does not guarantee the
participations, they are subject to the credit risks generally associated with
the underlying corporate borrower. In addition, because it may be necessary
under the terms of the loan participation for the investor to assert through the
issuing bank such rights as may exist against the underlying corporate borrower,
in the event the underlying corporate borrower fails to pay principal and
interest when due, the investor may be subject to delays, expenses and risks
that are greater than those that would have been involved if the investor had
purchased a direct obligation (such as commercial paper) of such borrower.
Moreover, under the terms of the loan participation, the investor may be
regarded as a creditor of the issuing bank (rather than of the underlying
corporate borrower), so that the issuer also may be subject to the risk that the
issuing bank may become insolvent. Further, in the event of the bankruptcy or
insolvency of the corporate borrower, the loan participation may be subject to
certain defenses that can be asserted by such borrower as a result of improper
conduct by the issuing bank. The secondary market, if any, for these loan
participations is extremely limited and any such participations purchased by the
investor are regarded as illiquid.
LOAN TRANSACTIONS-Loan transactions involve the lending of securities to a
broker-dealer or institutional investor for its use in connection with short
sales, arbitrages or other security transactions. The purpose of a qualified
11
<PAGE>
loan transaction is to afford a lender the opportunity to continue to earn
income on the securities loaned and at the same time earn fee income or income
on the collateral held by it.
Securities loans will be made in accordance with the following conditions:
(1) the Portfolio must receive at least 100% collateral in the form of cash or
cash equivalents, securities of the U.S. Government and its agencies and
instrumentalities, and approved bank letters of credit; (2) the borrower must
increase the collateral whenever the market value of the loaned securities
(determined on a daily basis) rises above the level of collateral; (3) the
Portfolio must be able to terminate the loan after notice, at any time; (4) the
Portfolio must receive reasonable interest on the loan or a flat fee from the
borrower, as well as amounts equivalent to any dividends, interest or other
distributions on the securities loaned, and any increase in market value of the
loaned securities; (5) the Portfolio may pay only reasonable custodian fees in
connection with the loan; and (6) voting rights on the securities loaned may
pass to the borrower, provided, however, that if a material event affecting the
investment occurs, the AMR Trust Board must be able to terminate the loan and
vote proxies or enter into an alternative arrangement with the borrower to
enable the AMR Trust Board to vote proxies.
While there may be delays in recovery of loaned securities or even a loss
of rights in collateral supplied should the borrower fail financially, loans
will be made only to firms deemed by the AMR Trust Board to be of good financial
standing and will not be made unless the consideration to be earned from such
loans would justify the risk. If the borrower of the securities fails
financially, there is a risk of delay in recovery of the securities loaned or
loss of rights in the collateral. Such loan transactions are referred to in this
Statement of Additional Information as "qualified" loan transactions.
The cash collateral so acquired through qualified loan transactions may be
invested only in those categories of high quality liquid securities previously
authorized by the AMR Trust Board.
MORTGAGE-BACKED SECURITIES-Mortgage-backed securities consist of both
collateralized mortgage obligations and mortgage pass-through certificates.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOs")-CMOs and interests in real
estate mortgage investment conduits ("REMICs") are debt securities
collateralized by mortgages, or mortgage pass-through securities. CMOs divide
the cash flow generated from the underlying mortgages or mortgage pass-through
securities into different groups referred to as "tranches," which are then
retired sequentially over time in order of priority. The principal governmental
issuers of such securities are the Federal National Mortgage Association
("FNMA"), a government sponsored corporation owned entirely by private
stockholders and the Federal Home Loan Mortgage Corporation ("FHLMC"), a
corporate instrumentality of the United States created pursuant to an act of
Congress which is owned entirely by Federal Home Loan Banks. The issuers of CMOs
are structured as trusts or corporations established for the purpose of issuing
such CMOs and often have no assets other than those underlying the securities
and any credit support provided. A REMIC is a mortgage securities vehicle that
holds residential or commercial mortgages and issues securities representing
interests in those mortgages. A REMIC may be formed as a corporation,
partnership, or segregated pool of assets. The REMIC itself is generally exempt
from federal income tax, but the income from the mortgages is reported by
investors. For investment purposes, interests in REMIC securities are virtually
indistinguishable from CMOs.
MORTGAGE PASS-THROUGH CERTIFICATES-Mortgage pass-through certificates
are issued by governmental, government-related and private organizations which
are backed by pools of mortgage loans.
(1) GOVERNMENT NATIONAL MORTGAGE ASSOCIATION ("GNMA") MORTGAGE PASS-THROUGH
CERTIFICATES ("GINNIE MAES")-GNMA is a wholly-owned U.S. Government corporation
within the Department of Housing and Urban Development. Ginnie Maes represent an
undivided interest in a pool of mortgages that are insured by the Federal
Housing Administration or the Farmers Home Administration or guaranteed by the
Veterans Administration. Ginnie Maes entitle the holder to receive all payments
(including prepayments) of principal and interest owed by the individual
mortgagors, net of fees paid to GNMA and to the issuer which assembles the
mortgage pool and passes through the monthly mortgage payments to the
certificate holders (typically, a mortgage banking firm), regardless of whether
the individual mortgagor actually makes the payment. Because payments are made
to certificate holders regardless of whether payments are actually received on
the underlying mortgages, Ginnie Maes are of the "modified pass-through"
mortgage certificate type. The GNMA is authorized to guarantee the timely
payment of principal and interest on the Ginnie Maes. The GNMA guarantee is
backed by the full faith and credit of the United States, and the GNMA has
unlimited authority to borrow funds from the U.S. Treasury to make payments
under the guarantee. The market for Ginnie Maes is highly liquid because of the
12
<PAGE>
size of the market and the active participation in the secondary market of
security dealers and a variety of investors.
(2) FHLMC MORTGAGE PARTICIPATION CERTIFICATES ("FREDDIE MACS")-Freddie Macs
represent interests in groups of specified first lien residential conventional
mortgages underwritten and owned by the FHLMC. Freddie Macs entitle the holder
to timely payment of interest, which is guaranteed by the FHLMC. The FHLMC
guarantees either ultimate collection or timely payment of all principal
payments on the underlying mortgage loans. In cases where the FHLMC has not
guaranteed timely payment of principal, the FHLMC may remit the amount due
because of its guarantee of ultimate payment of principal at any time after
default on an underlying mortgage, but in no event later than one year after it
becomes payable. Freddie Macs are not guaranteed by the United States or by any
of the Federal Home Loan Banks and do not constitute a debt or obligation of the
United States or of any Federal Home Loan Bank. The secondary market for Freddie
Macs is highly liquid because of the size of the market and the active
participation in the secondary market of the FHLMC, security dealers and a
variety of investors.
(3) FNMA GUARANTEED MORTGAGE PASS-THROUGH CERTIFICATES ("FANNIE
MAES")-Fannie Maes represent an undivided interest in a pool of conventional
mortgage loans secured by first mortgages or deeds of trust, on one family or
two to four family, residential properties. The FNMA is obligated to distribute
scheduled monthly installments of principal and interest on the mortgages in the
pool, whether or not received, plus full principal of any foreclosed or
otherwise liquidated mortgages. The obligation of the FNMA under its guarantee
is solely its obligation and is not backed by, nor entitled to, the full faith
and credit of the United States.
(4) MORTGAGE-RELATED SECURITIES ISSUED BY PRIVATE ORGANIZATIONS-Pools
created by non-governmental issuers generally offer a higher rate of interest
than government and government-related pools because there are no direct or
indirect government guarantees of payments in such pools. However, timely
payment of interest and principal of these pools is often partially supported by
various enhancements such as over-collateralization and senior/subordination
structures and by various forms of insurance or guarantees, including individual
loan, title, pool and hazard insurance. The insurance and guarantees are issued
by government entities, private insurers or the mortgage poolers. Although the
market for such securities is becoming increasingly liquid, securities issued by
certain private organizations may not be readily marketable.
RATINGS OF LONG-TERM OBLIGATIONS-The Portfolio utilizes ratings provided by
the following nationally recognized statistical rating organizations ("Rating
Organizations") in order to determine eligibility of long-term obligations.
The two highest Moody's Investors Service, Inc. ("Moody's") ratings for
long-term obligations (or issuers thereof) are Aaa and Aa. Obligations rated Aaa
are judged by Moody's to be of the best quality. Obligations rated Aa are judged
to be of high quality by all standards. Together with the Aaa group, such debt
comprises what is generally known as high-grade debt. Moody's states that debt
rated Aa is rated lower than Aaa debt because margins of protection or other
elements make long-term risks appear somewhat larger than for Aaa debt. Moody's
also supplies numerical indicators 1, 2, and 3 to rating categories. The
modifier 1 indicates that the security is in the higher end of its rating
category; the modifier 2 indicates a mid-range ranking; and modifier 3 indicates
a ranking toward the lower end of the category.
The two highest Standard & Poor's ratings for long-term obligations are AAA
and AA. Obligations rated AAA have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.
Obligations rated AA have a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
Duff & Phelps' two highest ratings for long-term obligations are AAA and
AA. Obligations rated AAA have the highest credit quality with risk factors
being negligible. Obligations rated AA are of high credit quality and strong
protection factors. Risk is modest but may vary slightly from time to time
because of economic conditions.
Thomson BankWatch ("BankWatch") long-term debt ratings apply to specific
issues of long-term debt and preferred stock. They specifically assess the
likelihood of an untimely repayment of principal or interest over the term to
maturity of the rated instrument. BankWatch's two highest ratings for long-term
obligations are AAA and AA. Obligations rated AAA indicate that the ability to
repay principal and interest on a timely basis is very high. Obligations rated
AA indicate a superior ability to repay principal and interest on a timely
basis, with limited incremental risk compared to issues rated in the highest
category.
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Fitch IBCA, Inc. ("Fitch") investment grade bond ratings provide a guide to
investors in determining the credit risk associated with a particular security.
The ratings represent Fitch's assessment of the issuer's ability to meet the
obligations of a specific debt issue or class of debt in a timely manner.
Obligations rated AAA are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonable foreseeable
events. Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated AAA.
Standard & Poor's, Duff & Phelps and Fitch apply indicators, such as
"+","-," or no character, to indicate relative standing within the major rating
categories.
RATINGS OF SHORT-TERM OBLIGATIONS-The rating P-1 is the highest short-term
rating assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: (1) evaluations of the management of the issuer; (2)
economic evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition by the management
of obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations.
Short-term obligations (or issuers thereof) rated A-1 by Standard & Poor's
have the following characteristics. Liquidity ratios are adequate to meet cash
requirements. The issuer has access to at least two additional channels of
borrowing. Basic earnings and cash flow have an upward trend with allowance made
for unusual circumstances. Typically, the issuer's industry is well established
and the issuer has a strong position within the industry. The reliability and
quality of management are unquestioned. Relative strength or weakness of the
above factors determines whether the issuer's short-term obligation is rated
A-1, A-2, or A-3.
The distinguishing feature of Duff & Phelps Credit Ratings' short-term
rating is the refinement of the traditional 1 category. The majority of
short-term debt issuers carry the highest rating, yet quality differences exist
within that tier. Obligations rated D-1+ indicate the highest certainty of
timely payment. Safety is just below risk-free U.S. Treasury obligations.
Obligations rated D-1 have a very high certainty of timely payment. Risk factors
are minor. Obligations rated D-1- have a high certainty of timely payment. Risk
factors are very small. Obligations rated D-2 have good certainty of timely
payment. Liquidity factors and company fundamentals are sound. Although ongoing
funding needs may enlarge total financing requirements, access to capital
markets is good. Risk factors are small.
Thomson BankWatch short-term ratings are intended to assess the likelihood
of an untimely or incomplete payment of principal or interest. Obligations rated
TBW-1 indicate a very high likelihood that principal and interest will be paid
on a timely basis. While the degree of safety regarding timely payment of
principal and interest is strong for an obligation rated TBW-2, the relative
degree of safety is not as high as for issues rated TBW-1.
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal and
investment notes. A rating of F-1+ indicates exceptionally strong credit
quality. Issues assigned this rating are regarded as having the strongest degree
of assurance for timely payment. Obligations rated F-1 have very strong credit
quality. Issues assigned this rating reflect an assurance of timely payment only
slightly less in degree than issues rated F-1+. Issues assigned a rating of F-2
indicate good credit quality. Issues assigned this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as great
as for issues assigned F-1+ and F-1 ratings.
REPURCHASE AGREEMENTS-A repurchase agreement, which provides a means to
earn income on funds for periods as short as overnight, is an arrangement under
which the purchaser (e.g., the Portfolio) purchases securities and the seller
agrees, at the time of sale, to repurchase the securities at a specified time
and price. The repurchase price will be higher than the purchase price, the
difference being income to the purchaser, or the purchase and repurchase prices
may be the same, with interest at a stated rate due to the purchaser together
with the repurchase price on repurchase. In either case, the income to the
purchaser is unrelated to the interest rate on the securities subject to the
repurchase agreement.
14
<PAGE>
The Portfolio may enter into repurchase agreements with any bank or
registered broker-dealer who, in the opinion of the Manager presents a minimum
risk of bankruptcy during the term of the agreement. The Portfolio may enter
into repurchase agreements as a short-term investment of its idle cash in order
to earn income. The securities will be held by a custodian (or agent) during the
term of the agreement. However, if the market value of the securities subject to
the repurchase agreement becomes less than the repurchase price (including
interest), the Portfolio will direct the seller of the securities to deliver
additional securities so that the market value of all securities subject to the
repurchase agreement will equal or exceed the repurchase price.
In the event of the commencement of bankruptcy or insolvency proceedings
with respect to the seller of the securities before the repurchase of the
securities under a repurchase agreement, the Portfolio may encounter a delay and
incur costs before being able to sell the security being held as collateral.
Delays may involve loss of interest or decline in price of the securities. Apart
from the risk of bankruptcy or insolvency proceedings, there is also the risk
that the seller may fail to repurchase the securities, in which case the
Portfolio may incur a loss if the proceeds to the Portfolio from the sale of the
securities to a third party are less than the repurchase price.
REVERSE REPURCHASE AGREEMENTS-The Portfolio may borrow funds for temporary
purposes by entering into reverse repurchase agreements. Pursuant to such
agreements, the Portfolio would sell portfolio securities to financial
institutions such as banks and broker/dealers and agree to repurchase them at a
mutually agreed-upon date and price. The Portfolio intends to enter into reverse
repurchase agreements only to avoid selling securities to meet redemptions
during market conditions deemed unfavorable by the investment adviser possessing
investment authority. At the time the Portfolio enters into a reverse repurchase
agreement, it will place in a segregated custodial account assets such as liquid
high quality debt securities having a value not less than 100% of the repurchase
price (including accrued interest), and will subsequently monitor the account to
ensure that such required value is maintained. Reverse repurchase agreements
involve the risk that the market value of the securities sold by the Portfolio
may decline below the price at which the Portfolio is obligated to repurchase
the securities. Reverse repurchase agreements are considered to be borrowings by
an investment company under the 1940 Act.
SECTION 4(2) SECURITIES-Section 4(2) securities are restricted as to
disposition under the federal securities laws, and generally are sold to
institutional investors, such as the Portfolio, that agree they are purchasing
the securities for investment and not with an intention to distribute to the
public. Any resale by the purchaser must be pursuant to an exempt transaction
and may be accomplished in accordance with Rule 144A. Section 4(2) securities
normally are resold to other institutional investors through or with the
assistance of the issuer or dealers that make a market in the Section 4(2)
securities, thus providing liquidity.
The AMR Trust Board and Manager will carefully monitor the Portfolio's
investments in Section 4(2) securities offered and sold under Rule 144A,
focusing on such important factors, among others, as valuation, liquidity, and
availability of information. Investments in Section 4(2) securities could have
the effect of reducing the Portfolio's liquidity to the extent that qualified
institutional buyers no longer wish to purchase these restricted securities.
U.S. GOVERNMENT SECURITIES-U.S. Government securities are issued or
guaranteed by the U.S. Government and include U.S. Treasury obligations (see
definition below) and securities issued by U.S. agencies and instrumentalities.
U. S. Government agencies or instrumentalities that issue or guarantee
securities include, but are not limited to, the Federal Housing Administration,
Farmers Home Administration, Export-Import Bank of the United States, Small
Business Administration, GNMA, General Services Administration, Central Bank for
Cooperatives, Federal Home Loan Banks, FHLMC, Federal Intermediate Credit Banks,
Federal Land Banks, Maritime Administration, Tennessee Valley Authority,
District of Columbia Armory Board, Inter-American Development Bank,
Asian-American Development Bank, Agency for International Development, Student
Loan Marketing Association and International Bank of Reconstruction and
Development.
Obligations of U.S. Government agencies and instrumentalities may or may
not be supported by the full faith and credit of the United States. Some are
backed by the right of the issuer to borrow from the Treasury; others are
supported by discretionary authority of the U.S. Government to purchase the
agencies' obligations; while still others, such as the Student Loan Marketing
Association, are supported only by the credit of the instrumentality. In the
case of securities not backed by the full faith and credit of the United States,
the investor must look principally to the agency issuing or guaranteeing the
obligation for ultimate repayment, and may not be able to assert a claim against
the United States itself in the event the agency or instrumentality does not
meet its commitment.
15
<PAGE>
U.S. TREASURY OBLIGATIONS-U.S. Treasury obligations include bills, notes
and bonds issued by the U.S. Treasury and Separately Traded Registered Interest
and Principal component parts of such obligations known as STRIPS.
VARIABLE OR FLOATING RATE OBLIGATIONS-A variable rate obligation is one
whose terms provide for the adjustment of its interest rate on set dates and
which, upon such adjustment, can reasonably be expected to have a market value
that approximates its par value. A floating rate obligation is one whose terms
provide for the adjustment of its interest rate whenever a specified interest
rate changes and which, at any time, can reasonably be expected to have a market
value that approximates its par value. Variable or floating rate obligations may
be secured by bank letters of credit.
Pursuant to Rule 2a-7 under the 1940 Act, variable or floating rate
obligations with stated maturities of more than 397 days may be deemed to have
shorter maturities as follows:
(1) An obligation that is issued or guaranteed by the United States
Government or any agency thereof which has a variable rate of interest
readjusted no less frequently than every 762 days will be deemed by the
Portfolio to have a maturity equal to the period remaining until the next
readjustment of the interest rate.
(2) A variable rate obligation, the principal amount of which is scheduled
on the face of the instrument to be paid in 397 days or less, will be deemed by
the Portfolio to have a maturity equal to the period remaining until the next
readjustment of the interest rate.
(3) A variable rate obligation that is subject to a demand feature will be
deemed by the Portfolio to have a maturity equal to the longer of the period
remaining until the next readjustment of the interest rate or the period
remaining until the principal amount can be recovered through demand.
(4) A floating rate obligation that is subject to a demand feature will be
deemed by the Portfolio to have a maturity equal to the period remaining until
the principal amount can be recovered through demand.
As used above, an obligation is "subject to a demand feature" when the
Portfolio is entitled to receive the principal amount of the obligation either
at any time on no more than 30 days' notice or at specified intervals not
exceeding one year and upon no more than 30 days' notice.
VARIABLE RATE AUCTION AND RESIDUAL INTEREST OBLIGATIONS-Variable rate
auction and residual interest obligations are created when an issuer or dealer
separates the principal portion of a long-term, fixed-rate municipal bond into
two long-term, variable-rate instruments. The interest rate on one portion
reflects short-term interest rates, while the interest rate on the other portion
is typically higher than the rate available on the original fixed-rate bond.
FINANCIAL STATEMENTS
The financial statements for the seed capital of the Fund as of September
27, 1999 are supplied below, as audited by Ernst & Young LLP.
16
<PAGE>
AMERICAN SELECT CASH RESERVE FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 27, 1999
ASSETS:
Cash....................................................... $ 100,000
Receivable from Adviser.................................... 20,000
---------------
Total Assets............................................. 120,000
---------------
LIABILITIES:
Payable to Adviser......................................... $ 20,000
---------------
Total Liabilities......................................... 20,000
---------------
NET ASSETS:
Applicable to 100,000 shares of beneficial interest,
respectively (unlimited authorization -- no par value.... $100,000
===============
NET ASSET VALUE, offering and redemption price per share $ 1.00
---------------
17
<PAGE>
AMERICAN SELECT CASH RESERVE FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 27, 1999
1. Organization
American Select Funds (the "Trust") is organized as a Massachusetts
business Trust under a Declaration of Trust dated August 18, 1999 and is
registered under the Investment Company Act of 1940, as amended, as a no-load,
open-end, management investment company. On August 20, 1999 the Trust's Board of
Trustees approved the formation of the American Select Cash Reserve Fund (the
"Fund"). The Trust had no operations other than those related to organizational
matters and the sale of 100,000 shares of beneficial interest of the Fund for
$100,000 to AMR Investment Services, Inc. (the "Manager") on September 27, 1999.
The Trust has been advised that the Manager has no present intention of
redeeming or reselling such shares. The Manager is a wholly-owned subsidiary of
AMR Corporation, the parent company of American Airlines, Inc., and was
organized in 1986 to provide business management, advisory, administrative and
asset management consulting services.
2. Transactions with Affiliates
The Fund will reimburse the Manager for the costs incurred in connection with
the Fund's organization.
Certain officers and/or Trustees of the Fund are also officers of the
Manager.
18
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Trustees and Shareholder
American Select Cash Reserve Fund
We have audited the accompanying statement of assets and liabilities of the
American Select Cash Reserve Fund, (the Fund) as of September 27, 1999 and the
related statement of operations for the period from August 20, 1999
(organization of the Fund) to September 27, 1999. These financial statements are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the American Select Cash
Reserves Fund at September 27, 1999 and the results of its operations for the
period from August 20, 1999 to September 27, 1999, in conformity with generally
accepted accounting principles.
/s/ ERNST & YOUNG LLP
Dallas, Texas
September 27, 1999
19
<PAGE>
AMERICAN SELECT FUNDS
PART C. OTHER INFORMATION
Item 23. Exhibits
--------
(a) Declaration of Trust (filed herewith)
(b) Bylaws (filed herewith)
(c) Voting trust agreement -- none
(d) Form of Management Agreement between American Select Funds and
AMR Investment Services, Inc. dated September __, 1999 (filed
herewith)
(e) Form of Distribution Agreement between the American Select
Funds and SWS Financial Services, Inc. dated September __,
1999 (filed herewith)
(f) Bonus, profit sharing or pension plans -- none
(g) Form of Custodian Agreement between the American Select Funds
and State Street Bank and Trust Company dated September __,
1999 (filed herewith)
(h) Form of Transfer Agency and Service Agreement between the
American Select Funds and State Street Bank and Trust Company
(filed herewith)
(i) Opinion and consent of counsel (filed herewith)
(j) Consent of Independent Auditors (filed herewith)
(k) Financial statements omitted from prospectus -- (not
applicable)
(l) Letter of investment intent (filed herewith)
(m) Plan pursuant to Rule 12b-1 - none
(n) Plan Pursuant to Rule 18f-3 - none
Other: Powers of Attorney for Trustees (filed herewith)
- -----------------------
Item 24. Persons Controlled by or under Common Control with Registrant
-------------------------------------------------------------
None.
<PAGE>
Item 25. Indemnification
----------------
Article XI, Section 2 of the Declaration of Trust of the American Select
Funds provides that:
(a) Subject to the exceptions and limitations contained in paragraph (b)
below:
(i) every person who is, or has been, a Trustee or officer of the
Trust (hereinafter referred to as "Covered Person") shall be indemnified by the
Trust to the fullest extent permitted by law against liability and against all
expenses reasonably incurred or paid by him in connection with any claim,
action, suit or proceeding in which he becomes involved as a party or otherwise
by virtue of his being or having been a Trustee or officer and against amounts
paid or incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall apply
to all claims, actions, suits or proceedings (civil, criminal or other,
including appeals), actual or threatened while in office or thereafter, and the
words "liability" and "expenses" shall include, without limitation, attorneys'
fees, costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before which
the proceeding was brought (A) to be liable to the Trust or its Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office or (B) not to have acted in
good faith in the reasonable belief that his action was in the best interest of
the Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office (A) by the court or other body approving
the settlement; (B) by at least a majority of those Trustees who are neither
interested persons of the Mileage Trust nor are parties to the matter based upon
a review of readily available facts (as opposed to a full trial-type inquiry);
or (C) by written opinion of independent legal counsel based upon a review of
readily available facts (as opposed to a full trial-type inquiry); provided,
however, that any Shareholder may, by appropriate legal proceedings, challenge
any such determination by the Trustees, or by independent counsel.
(c) The rights of indemnification herein provided may be insured against
by policies maintained by the Trust, shall be severable, shall not be exclusive
of or affect any other rights to which any Covered Person may now or hereafter
be entitled, shall continue as to a person who has ceased to be such Trustee or
officer and shall inure to the benefit of the heirs, executors and
administrators of such a person. Nothing contained herein shall affect any
rights to indemnification to which Trust personnel, other than Trustees and
officers, and other persons may be entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit, or proceeding of the character described in
paragraph (a) of this Section 2 may be paid by the Trust from time to time prior
to final disposition thereof upon receipt of an undertaking by or on behalf of
such Covered Person that such amount will be paid over by him to the Trust if it
is ultimately determined that he is not entitled to indemnification under this
Section 2; provided, however, that:
(i) such Covered Person shall have provided appropriate security for
such undertaking;
C-2
<PAGE>
(ii) the Trust is insured against losses arising out of any such
advance payments; or
(iii) either a majority of the Trustees who are neither interested
persons of the Trust nor parties to the matter, or independent legal counsel in
a written opinion, shall have determined, based upon a review of readily
available facts (as opposed to a trial-type inquiry or full investigation), that
there is reason to believe that such Covered Person will be found entitled to
indemnification under this Section 2.
According to Article XII, Section 1 of the Declaration of Trust, the Trust
is a trust, not a partnership. Trustees are not liable personally to any person
extending credit to, contracting with or having any claim against the Trust, a
particular series or the Trustees. A Trustee, however, is not protected from
liability due to willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
Article XII, Section 2 provides that, subject to the provisions of Section
1 of Article XII and to Article XI, the Trustees are not liable for errors of
judgment or mistakes of fact or law, or for any act or omission in accordance
with advice of counsel or other experts or for failing to follow such advice.
Item 26. I. Business and Other Connections of Investment Manager
----------------------------------------------------
AMR Investment Services, Inc., 4333 Amon Carter Boulevard, MD 5645, Fort
Worth, Texas 76155, offers investment management and administrative services.
Information as to the officers and directors of the Manager is included in its
current Form ADV filed with the SEC and is incorporated by reference herein.
Item 27. Principal Underwriter
---------------------
(a) SWS Financial Services, Inc., 7001 Preston Road, Dallas, TX 75205, is
the principal underwriter for the American Select Funds.
(b) The directors and officers of the Trust's principal underwriter are:
Positions & Offices Position
Name with Underwriter with Registrant
- ---- ---------------- ---------------
Sue H. Peden Chief Executive Officer None
Raymond E. Wooldridge Chairman None
Dianna Boswell President None
Diana Burrell Vice President None
Diane Scott Vice President None
The address of the above named directors and officers is 7001 Preston
Road, Dallas, TX 75205.
C-3
<PAGE>
Item 28. Location of Accounts and Records
--------------------------------
The books and other documents required by Rule 31a-1 under the Investment
Company Act of 1940 are maintained as follows: 31a-1(b)(1) Journals - in the
physical possession of the Trust's custodian; 31-1(b)(2)(I), (ii) & (iii) - in
the physical possession of the Trust's custodian; 31a-1()(2)(iv) - in the
physical possession of the Trust's transfer agent; 31a-1(b)(4) - in the physical
possession of the Trust's Manager; 31a-1(b)(5) - in the physical possession of
the Trust's investment advisers; 31a-1(b)(6) - in the physical possession of the
Trust's Manager, investment advisers and custodian; 31a-1(b)(7) - in the
physical possession of the Trust's custodian; 31a-1(b)(8) - in the physical
possession of the Trust's custodian; 31a-1(b)(9) - in the physical possession of
the Trust's investment advisers; 31a-1(b)(10) - in the physical possession of
the Trust's Manager; 31a-1(b)(11) - in the physical possession of the Trust's
Manager; 31a-1(b)(12) - in the physical possession of the Trust's Manager,
investment advisers and custodian.
Item 29. Management Services
-------------------
All substantive provisions of any management-related service contract are
discussed in Part A or Part B.
Item 30. Undertakings
------------
Registrant hereby undertakes to furnish each person to whom a prospectus
is delivered with a copy of its latest annual report to Shareholders when
available, upon request and without charge.
Registrant hereby undertakes to carry out all indemnification provisions
of its Declaration of Trust in accordance with Investment Company Act Release
No. 11330 (September 4, 1980) and successor releases.
Insofar as indemnification for liability arising under the Securities Act
of 1933, as amended ("1933 Act"), may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the provisions in under Item
25 herein, or otherwise, the Registrant has been advised that in the opinion of
the SEC such indemnification is against public policy as expressed in the 1933
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication.
C-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, the Registrant has duly
caused this Registration Statement on Form N-1A to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Fort Worth and the
State of Texas, on October 1, 1999.
AMERICAN SELECT FUNDS
By: /s/ William F. Quinnn
-----------------------------
William F. Quinn
President
Attest:
/s/ Barry Y. Greenberg
- --------------------------------------
Barry Y. Greenberg
Vice President and Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ William F. Quinn
- ----------------------- President and October 1, 1999
William F. Quinn Trustee
Alan D. Feld* Trustee October 1, 1999
- -----------------------
Alan D. Feld
Ben J. Fortson* Trustee October 1, 1999
- -----------------------
Ben J. Fortson
John S. Justin* Trustee October 1, 1999
- -----------------------
John S. Justin
Stephen D. O'Sullivan* Trustee October 1, 1999
- -----------------------
Stephen D. O'Sullivan
Roger T. Staubach* Trustee October 1, 1999
- -----------------------
Roger T. Staubach
Kneeland Youngblood* Trustee October 1, 1999
- -----------------------
Kneeland Youngblood
*By /s/ William F. Quinn
------------------------------------
William F. Quinn, Attorney-In-Fact
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, AMR Investment Services
Trust has duly caused this Registration Statement on Form N-1A as it relates to
AMR Investment Services Trust to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Fort Worth and the State of Texas, on
October 1, 1999.
AMR INVESTMENT SERVICES TRUST
By: /s/ William F. Quinn
-----------------------------
William F. Quinn
President
Attest:
/s/ Barry Y. Greenberg
- --------------------------------------
Barry Y. Greenberg
Vice President and Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ William F. Quinn
- ----------------------- President and October 1, 1999
William F. Quinn Trustee
Alan D. Feld* Trustee October 1, 1999
- -----------------------
Alan D. Feld
Ben J. Fortson* Trustee October 1, 1999
- -----------------------
Ben J. Fortson
John S. Justin* Trustee October 1, 1999
- -----------------------
John S. Justin
Stephen D. O'Sullivan* Trustee October 1, 1999
- -----------------------
Stephen D. O'Sullivan
Roger T. Staubach* Trustee October 1, 1999
- -----------------------
Roger T. Staubach
Kneeland Youngblood* Trustee October 1, 1999
- -----------------------
Kneeland Youngblood
*By /s/ William F. Quinn
------------------------------------
William F. Quinn, Attorney-In-Fact
<PAGE>
POWER OF ATTORNEY
I, Alan D. Feld, Trustee of American Select Funds (the "Trust"), hereby
constitute and appoint William F. Quinn and Barry Y. Greenberg my true and
lawful attorney with full power to sign for me in my capacity as Trustee for the
Trust any registration statement on Form N-1A under the Securities Act of 1933
and/or the Investment Company Act of 1940 and any amendments thereto, and all
instruments necessary or desirable in connection therewith, hereby ratifying and
confirming my signature as it may be signed by said attorney to any and all
amendments to said registration statements.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this instrument has been signed below in my capacity as Trustee on this 24th day
of September, 1999.
Signature Title
--------- -----
/s/ Alan D. Feld
----------------------------
Alan D. Feld Trustee
<PAGE>
POWER OF ATTORNEY
I, Ben J. Fortson, Trustee of American Select Funds (the "Trust"), hereby
constitute and appoint William F. Quinn and Barry Y. Greenberg my true and
lawful attorney with full power to sign for me in my capacity as Trustee for the
Trust any registration statement on Form N-1A under the Securities Act of 1933
and/or the Investment Company Act of 1940 and any amendments thereto, and all
instruments necessary or desirable in connection therewith, hereby ratifying and
confirming my signature as it may be signed by said attorney to any and all
amendments to said registration statements.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this instrument has been signed below by the following in my capacity as Trustee
on this 27th day of September, 1999.
Signature Title
--------- -----
/s/ Ben J. Fortson
----------------------------
Ben J. Fortson Trustee
<PAGE>
POWER OF ATTORNEY
I, John S. Justin, Trustee of American Select Funds (the "Trust"), hereby
constitute and appoint William F. Quinn and Barry Y. Greenberg my true and
lawful attorney with full power to sign for me in my capacity as Trustee for the
Trust any registration statement on Form N-1A under the Securities Act of 1933
and/or the Investment Company Act of 1940 and any amendments thereto, and all
instruments necessary or desirable in connection therewith, hereby ratifying and
confirming my signature as it may be signed by said attorney to any and all
amendments to said registration statements.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this instrument has been signed below by the following in my capacity as Trustee
on this 27th day of September, 1999.
Signature Title
--------- -----
/s/ John S. Justin
----------------------------
John S. Justin Trustee
<PAGE>
POWER OF ATTORNEY
I, Stephen D. O'Sullivan, Trustee of American Select Funds (the "Trust"),
hereby constitute and appoint William F. Quinn and Barry Y. Greenberg my true
and lawful attorney with full power to sign for me in my capacity as Trustee for
the Trust any registration statement on Form N-1A under the Securities Act of
1933 and/or the Investment Company Act of 1940 and any amendments thereto, and
all instruments necessary or desirable in connection therewith, hereby ratifying
and confirming my signature as it may be signed by said attorney to any and all
amendments to said registration statements.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this instrument has been signed below by the following in my capacity as Trustee
on this 28 day of September, 1999.
Signature Title
--------- -----
/s/ Stephen D. O'Sullivan
----------------------------
Stephen D. O'Sullivan Trustee
<PAGE>
POWER OF ATTORNEY
I, Roger T. Staubach, Trustee of American Select Funds (the "Trust"),
hereby constitute and appoint William F. Quinn and Barry Y. Greenberg my true
and lawful attorney with full power to sign for me in my capacity as Trustee for
the Trust any registration statement on Form N-1A under the Securities Act of
1933 and/or the Investment Company Act of 1940 and any amendments thereto, and
all instruments necessary or desirable in connection therewith, hereby ratifying
and confirming my signature as it may be signed by said attorney to any and all
amendments to said registration statements.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this instrument has been signed below by the following in my capacity as Trustee
on this 28 day of September, 1999.
Signature Title
--------- -----
/s/ Roger T. Staubach
----------------------------
Roger T. Staubach Trustee
<PAGE>
POWER OF ATTORNEY
I, Kneeland Youngblood, Trustee of American Select Funds (the "Trust"),
hereby constitute and appoint William F. Quinn and Barry Y. Greenberg my true
and lawful attorney with full power to sign for me in my capacity as Trustee for
the Trust any registration statement on Form N-1A under the Securities Act of
1933 and/or the Investment Company Act of 1940 and any amendments thereto, and
all instruments necessary or desirable in connection therewith, hereby ratifying
and confirming my signature as it may be signed by said attorney to any and all
amendments to said registration statements.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this instrument has been signed below by the following in my capacity as Trustee
on this ___ day of September, 1999.
Signature Title
--------- -----
/s/ Kneeland Younblood
--------------------------
Kneeland Youngblood Trustee
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description Page
------ ----------- ----
(a) Declaration of Trust (filed herewith)
(b) Bylaws (filed herewith)
(c) Voting trust agreement -- none
(d) Form of Management Agreement between American Select Funds and
AMR Investment Services, Inc. dated September __, 1999 (filed
herewith)
(e Form of Distribution Agreement between the American Select
Funds and SWS Financial Services, Inc. dated September __,
1999 (filed herewith)
(f) Bonus, profit sharing or pension plans -- none
(g) Form of Custodian Agreement between the American Select Funds
and State Street Bank and Trust Company dated September __,
1999 (filed herewith)
(h) Form of Transfer Agency and Service Agreement between the
American Select Funds and State Street Bank and Trust Company
(filed herewith)
(i) Opinion and consent of counsel (filed herewith)
(j) Consent of Independent Auditors (filed herewith)
(k) Financial statements omitted from prospectus -- (not
applicable)
(l) Letter of investment intent (filed herewith)
(m) Plan pursuant to Rule 12b-1 - none
(n) Plan Pursuant to Rule 18f-3 - none
Other: Powers of Attorney for Trustees (filed herewith)
- -----------------------
AMERICAN SELECT FUNDS
A MASSACHUSETTS BUSINESS TRUST
DECLARATION OF TRUST
AUGUST 18, 1999
<PAGE>
AMERICAN SELECT FUNDS
DECLARATION OF TRUST
TABLE OF CONTENTS
PAGE
ARTICLE I NAME, PRINCIPAL PLACE OF BUSINESS AND DEFINITIONS..................1
Section 1. Name........................................................1
Section 2. Principal Place of Business.................................1
Section 3. Resident Agent..............................................1
Section 4. Definitions.................................................2
ARTICLE II PURPOSE OF TRUST..................................................2
ARTICLE III BENEFICIAL INTEREST..............................................3
Section 1. Shares of Beneficial Interest...............................3
Section 2. Ownership of Shares.........................................3
Section 3. Investment in the Trust.....................................3
Section 4. Assets and Liabilities of the Trust.........................3
Section 5. No Preemptive Rights........................................4
Section 6. Limitation on Personal Liability............................4
ARTICLE IV THE TRUSTEES......................................................4
Section 1. Management of the Trust.....................................4
Section 2. Election of Trustees........................................5
Section 3. Term of Office of Trustees..................................5
Section 4. Resignation and Appointment of Trustees.....................5
Section 5. Temporary Absence of Trustee................................6
Section 6. Number of Trustees..........................................6
Section 7. Effect of Death, Resignation, Etc. of a Trustee.............6
Section 8. Ownership of Trust Assets...................................6
ARTICLE V POWERS OF THE TRUSTEES.............................................6
Section 1. Powers......................................................6
Section 2. Trustees and Officers as Shareholders.......................9
Section 3. Action by the Trustees......................................9
Section 4. Chairman of the Trustees...................................10
ARTICLE VI EXPENSES OF THE TRUST............................................10
ARTICLE VII INVESTMENT ADVISER, PRINCIPAL UNDERWRITER AND TRANSFER AGENT....10
Section 1. Investment Adviser.........................................10
Section 2. Principal Underwriter......................................11
Section 3. Transfer Agent.............................................11
i
<PAGE>
Section 4. Parties to Contract........................................11
Section 5. Provisions and Amendments..................................12
ARTICLE VIII SHAREHOLDERS' VOTING POWERS AND MEETINGS.......................12
Section 1. Voting Powers..............................................12
Section 2. Meetings...................................................13
Section 3. Quorum and Required Vote...................................13
ARTICLE IX CUSTODIAN........................................................13
Section 1. Appointment and Duties.....................................13
Section 2. Employment of Sub-Custodians...............................14
Section 3. Central Depository System..................................14
ARTICLE X DISTRIBUTIONS AND REDEMPTIONS.....................................15
Section 1. Distributions..............................................15
Section 2. Redemptions................................................15
Section 3. Determination of Net Asset Value and Valuation of
Portfolio Assets..........................................16
Section 4. Suspension of the Right of Redemption......................16
ARTICLE XI LIMITATION OF LIABILITY AND INDEMNIFICATION......................17
Section 1. Limitation of Liability....................................17
Section 2. Indemnification............................................17
Section 3. Shareholders...............................................18
ARTICLE XII MISCELLANEOUS...................................................19
Section 1. Trust Not A Partnership....................................19
Section 2. Trustee's Good Faith Action, Expert Advice, No Bond
or Surety.................................................19
Section 3. Establishment of Record Dates..............................19
Section 4. Termination of Trust.......................................20
Section 5. Filing of Copies, References, Headings.....................21
Section 6. Applicable Law.............................................21
Section 7. Amendments.................................................21
Section 8. Fiscal Year................................................22
Section 9. Use of the Words "American" and "American Airlines"........22
Section 10. Notice to Other Parties....................................22
ii
<PAGE>
AMERICAN SELECT FUNDS
---------------------
DECLARATION OF TRUST
--------------------
This DECLARATION OF TRUST is made on August 18, 1999, by the undersigned
Trustees and by the holders of Shares of beneficial interest to be issued
hereunder as hereinafter provided.
WITNESSETH that
WHEREAS, the Trustees have agreed to manage all property coming into their
hands as trustees of a Massachusetts voluntary association with transferable
Shares in accordance with the provisions hereinafter set forth; and
WHEREAS, the Trustees hereby desire to establish a trust for the
investment and reinvestment of funds contributed thereto.
NOW, THEREFORE, the Trustees hereby declare that they will hold all cash,
securities and other assets, which they may from time to time acquire in any
manner as Trustees hereunder IN TRUST to manage and dispose of the same upon the
following terms and conditions for the pro rata benefit of the holders from time
to time of Shares in this Trust as hereinafter set forth.
ARTICLE I
---------
NAME, PRINCIPAL PLACE OF BUSINESS AND DEFINITIONS
-------------------------------------------------
NAME
- ----
SECTION 1. This Trust shall be known as the "American Select Funds" and
the Trustees shall conduct the business of the Trust under that name or any
other name as they may from time to time determine.
PRINCIPAL PLACE OF BUSINESS
- ---------------------------
SECTION 2. The principal place of business of the Trust shall be 4333 Amon
Carter Boulevard, Fort Worth, Texas 76155.
RESIDENT AGENT
- --------------
SECTION 3. The resident agent for the Trust in Massachusetts shall be CT
Corporation, 2 Oliver Street, Boston, Massachusetts, or such other person as the
Trustees may from time to time designate.
<PAGE>
DEFINITIONS
- -----------
SECTION 4. Wherever used herein, unless otherwise required by the context
or specifically provided:
(a) The terms "Affiliated Person," "Assignment," "Commission,"
"Interested Person," "Majority Shareholder Vote" (the 67% or 50%
requirement of the third sentence of Section 2(a)(42) of the 1940 Act,
whichever may be applicable) and "Principal Underwriter" shall have the
meanings given them in the 1940 Act, as amended from time to time;
(b) The "Trust" refers to the American Select Funds;
(c) "Net Asset Value" means the net asset value of each Trust series
as determined in the manner provided in Article X, Section 3;
(d) "Shareholder" means a record owner of Shares of the Trust;
(e) The "Trustees" refers to the individual trustees in their
capacity as trustees duly elected or appointed, qualified hereunder and
serving as Trustees of the Trust and their successor or successors for the
time being in office as such trustee or trustees;
(f) "Shares" means the equal proportionate transferable units of
interest into which the beneficial interest of the Trust, series or any
class thereof shall be divided from time to time, and includes fractions
of shares as well as whole shares (all of the transferable units of a
series or of a single class may be referred to as "shares" as the context
may require) consistent with the requirements of federal and/or other
securities laws;
(g) The "1940 Act" refers to the Investment Company Act of 1940, as
amended from time to time;
(h) "Declaration of Trust" shall mean this Declaration of Trust as
amended or restated from time to time; and
(i) "Bylaws" shall mean the Bylaws of the Trust as amended from time
to time.
ARTICLE II
----------
PURPOSE OF TRUST
----------------
The purpose of this Trust is to provide investors, through one or more
series or classes thereof as designated by the Trustees, with a continuous
source of managed investments in securities.
2
<PAGE>
ARTICLE III
-----------
BENEFICIAL INTEREST
-------------------
SHARES OF BENEFICIAL INTEREST
- -----------------------------
SECTION 1. The Shares of the Trust shall be issued in one or more series
and/or classes as the Trustees may, without shareholder approval, authorize.
Each series shall be preferred over all other series in respect of the assets
allocated to that series. The beneficial interest in each series shall at all
times be divided into Shares, with or without par value as the Trustees may
specify, each of which shall represent an equal proportionate interest in the
series with each other Share of the same series, none having priority or
preference over another. Each series shall be represented by one or more classes
of Shares, with each class possessing such rights (including, notwithstanding
any contrary provision herein, voting rights) as the Trustees may, without
Shareholder approval, authorize. Shares of each series, when issued, shall be
fully paid and non-assessable. The number of Shares authorized shall be
unlimited, and the Shares so authorized may be represented in part by fractional
Shares. The Trustees may from time to time and without Shareholder approval
divide or combine the Shares of any series or class into a greater or lesser
number without thereby changing the proportionate beneficial interests in the
series or class.
OWNERSHIP OF SHARES
- -------------------
SECTION 2. The ownership of Shares shall be recorded in the books of the
Trust. The Trustees may make such rules as they consider appropriate for the
transfer of Shares and similar matters. The record books of the Trust shall be
conclusive as to who are the holders of Shares and as to the number of Shares
held from time to time by each Shareholder.
INVESTMENT IN THE TRUST
- -----------------------
SECTION 3. The Trustees shall accept investments in the Trust from such
persons and on such terms as they may from time to time authorize. As determined
by guidelines established by the Trustees, such investments may be in the form
of cash or securities in which the Trust (or each designated series) is
authorized to invest, valued as provided in Article X, Section 3. Investments in
the Trust shall be credited to each Shareholder's account in the form of full or
fractional Shares at the Net Asset Value per Share next determined after the
investment is received; provided, however, that the Trustees may, in their sole
discretion: (a) impose a sales charge upon investments in the Trust and (b)
issue fractional Shares. The Trustees shall have the right to refuse to accept
investments in the Trust at any time without any cause or reason whatsoever.
ASSETS AND LIABILITIES OF THE TRUST
- -----------------------------------
SECTION 4. All consideration received by the Trust for the issue or sale
of Shares of a particular series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall be
3
<PAGE>
referred to as "assets belonging to" that series and shall be held by the
Trustees in Trust for the benefit of the Shareholders of that series. The assets
belonging to each particular series shall be charged with the liabilities of
that series and all expenses, costs, charges and reserves attributable to that
series, except that liabilities and expenses allocated solely to a particular
class shall be borne by that class. In addition, any assets, income, earnings,
profits, and proceeds thereof, funds, or payments or any general liabilities,
expenses, costs, charges or reserves of the Trust that are not readily
identifiable as belonging to or chargeable to any particular series or class
shall be allocated by the Trustees between and among one or more of the series
or classes in such manner as they, in their sole discretion, deem fair and
equitable. Each such allocation shall be conclusive and binding upon the
Shareholders of all series or classes for all purposes, and shall be referred to
as assets belonging to that series or class. Any creditor of any series may look
only to the assets of that series to satisfy such creditor's debt.
NO PREEMPTIVE RIGHTS
- --------------------
SECTION 5. Shareholders shall have no preemptive or other right to
subscribe to any additional Shares or other securities issued by the Trust.
LIMITATION ON PERSONAL LIABILITY
- --------------------------------
SECTION 6. The Trustees shall have no power to bind any Shareholder
personally or to call upon any Shareholder for the payment of any sum of money
or assessment whatsoever other than such as the Shareholder may at any time
personally agree to pay by way of subscription for any Shares or otherwise.
Every note, bond, contract or other undertaking issued by or on behalf of the
Trust or the Trustees relating to the Trust shall include a recitation limiting
the obligation represented thereby to the Trust and its assets (but the omission
of such a recitation shall not operate to bind any Shareholder).
ARTICLE IV
----------
THE TRUSTEES
------------
MANAGEMENT OF THE TRUST
- -----------------------
SECTION 1. The business and affairs of the Trust shall be managed by the
Trustees, and they shall have all powers necessary and desirable to carry out
that responsibility.
ELECTION OF TRUSTEES
- --------------------
SECTION 2. On a date fixed by the Trustees, the Shareholders shall elect
not less than three (3) Trustees. A Trustee shall not be required to be a
Shareholder of the Trust. Until such election, the Trustee shall be William F.
Quinn and such other individuals as the Board of Trustees shall appoint pursuant
to Section 4 of Article IV.
4
<PAGE>
TERM OF OFFICE OF TRUSTEES
- --------------------------
SECTION 3. The Trustees shall hold office during the lifetime of this
Trust, and until its termination as hereinafter provided, except that: (a) any
Trustee may resign his or her trust by written instrument signed by him or her
and delivered to the Trust's President or the other Trustees, which resignation
shall take effect upon such delivery or upon such later date as is specified
therein; (b) any Trustee may be removed at any time by written instrument,
signed by at least two-thirds of the number of Trustees prior to such removal,
specifying the date when such removal shall become effective; (c) a Trustee may
be removed at any Special Meeting of Shareholders of the Trust by a vote of
two-thirds of the outstanding Shares; and (d) every Trustee must resign his or
her position effective no later than the last day of the calendar year in which
such Trustee becomes seventy (70) years of age. Upon the resignation or removal
of a Trustee, or his or her otherwise ceasing to be a Trustee, he or she shall
execute and deliver such documents as the remaining Trustees shall require for
the purpose of conveying to the Trust or the remaining Trustees any Trust
Property held in the name of the resigning or removed Trustee. Upon the
incapacity or death of any Trustee, his legal representative shall execute and
deliver on his or her behalf such documents as the remaining Trustees shall
require as provided in the preceding sentence.
RESIGNATION AND APPOINTMENT OF TRUSTEES
- ---------------------------------------
SECTION 4. Any vacancy on the Board of Trustees that results from an
increase in the number of Trustees may be filled by a majority of the entire
Board of Trustees, provided that a quorum is present, and any other vacancy that
shall exist for any reason, including, but not limited to, declination to assume
office, death, resignation, or removal, the remaining Trustees shall fill such
vacancy by appointing such other person as they in their discretion shall see
fit, consistent with the limitations under the 1940 Act. Such appointment shall
be evidenced by a written instrument signed by a majority of the Trustees in
office or by recording in the records of the Trust, whereupon the appointment
shall take effect. An appointment of a Trustee may be made by the Trustees then
in office in anticipation of a vacancy to occur by reason of retirement,
resignation or increase in number of Trustees effective at a later date,
provided that said appointment shall become effective only at or after the
effective date of said retirement, resignation or increase in number of
Trustees. As soon as any Trustee so appointed shall have accepted this trust,
the trust estate shall vest in the new Trustee or Trustees, together with the
continuing Trustees, without any further act or conveyance, and he or she shall
be deemed a Trustee hereunder. The power of appointment of Trustees is subject
to the provisions of Section 16(a) of the 1940 Act.
TEMPORARY ABSENCE OF TRUSTEE
- ----------------------------
SECTION 5. Any Trustee may, by power of attorney, delegate his or her
power for a period not exceeding six months at any one time to any other Trustee
or Trustees, provided that in no case shall less than two Trustees personally
exercise the other powers hereunder, except as herein otherwise expressly
provided.
5
<PAGE>
NUMBER OF TRUSTEES
- ------------------
SECTION 6. The number of Trustees serving hereunder at any time shall be
determined by the Trustees themselves and shall not be less than one (1) nor
more than twelve (12). Whenever a vacancy in the Board of Trustees shall occur,
until such vacancy is filled, or while any Trustee is physically or mentally
incapacitated by reason of disease or otherwise, the other Trustees shall have
all the powers hereunder and the certificate of the other Trustees of such
vacancy, absence or incapacity, shall be conclusive.
EFFECT OF DEATH, RESIGNATION, ETC. OF A TRUSTEE
- -----------------------------------------------
SECTION 7. The death, declination, resignation, retirement, removal,
incapacity, or inability of the Trustees, or any one of them, shall not operate
to annul the Trust or to revoke any existing agency created pursuant to the
terms of this Declaration of Trust.
OWNERSHIP OF TRUST ASSETS
- -------------------------
SECTION 8. The assets of the Trust shall be held separate and apart from
any assets now or hereafter held in any capacity other than as Trustee hereunder
by the Trustees or any successor Trustees. All of the assets of the Trust shall
at all times be considered as vested in the Trustees. No Shareholder shall be
deemed to have a severable ownership in any individual asset of the Trust or any
right of partition or possession thereof, but each Shareholder shall have a
proportionate undivided beneficial interest in the Trust.
ARTICLE V
---------
POWERS OF THE TRUSTEES
----------------------
POWERS
- ------
SECTION 1. The Trustees in all instances shall act as principals, and are
and shall be free from the control of the Shareholders. The Trustees shall have
full power and authority to do any and all acts and to make and execute any and
all contracts and instruments that they may consider necessary or appropriate in
connection with the management of the Trust. The Trustees shall not in any way
be bound or limited by present or future laws or customs in regard to trust
investments, but shall have full authority and power to make any and all
investments that they, in their sole discretion, shall deem proper to accomplish
the purpose of this Trust. Without limiting the foregoing, but subject to any
applicable limitation in the Declaration of Trust or the Bylaws of the Trust,
the Trustees shall have power and authority:
(a) To invest and reinvest cash and other property, and to hold cash
or other property uninvested, without in any event being bound or limited
by any present or future law or custom in regard to investments by
Trustees, and to sell, exchange, lend, pledge, mortgage, hypothecate,
write options on and lease any or all of the assets of the Trust; to
purchase and sell options on securities, currencies, indices, futures
contracts and other financial instruments and enter into closing
transactions in connection therewith, to enter into all types of
6
<PAGE>
commodities contracts, including without limitation the purchase and sale
of futures contracts and forward contracts on securities, indices,
currencies, and other financial instruments; to engage in forward
commitment, "when-issued" and delayed delivery transactions; to enter into
repurchase agreements and reverse repurchase agreements; and to employ all
types of hedging techniques and investment management strategies.
(b) To adopt Bylaws not inconsistent with this Declaration of Trust
providing for the conduct of the business of the Trust and to amend and
repeal them to the extent that the rights of amendment and repeal are not
reserved to Shareholders.
(c) To elect and remove such officers and appoint and terminate such
agents as they consider appropriate.
(d) To employ a bank, trust company or other entity permitted by the
Commission to serve as Custodian ("Custodian") of any assets of the Trust
subject to any conditions set forth in this Declaration of Trust or in the
Bylaws, if any.
(e) To retain a transfer agent and Shareholder servicing agent, or
both.
(f) To provide for the distribution of interests of the Trust either
through a principal underwriter in the manner hereinafter provided for or
by the Trust itself, or both.
(g) To set record dates in the manner hereinafter provided.
(h) To delegate such authority as they consider desirable to any
officers of the Trust and to any agent, independent contractor, Custodian
or underwriter.
(i) To sell or exchange any or all of the assets of the Trust,
subject to the provisions of Article XII, Section 4(b) hereof.
(j) To vote or give assent, or exercise any rights of ownership with
respect to stock or other securities or property; and to execute and
deliver powers of attorney to such person or persons as the Trustees shall
deem proper, granting to such person or persons such power and discretion
with relation to securities or property as the Trustees shall deem proper.
(k) To exercise powers and rights of subscription or otherwise which
in any manner arise out of ownership of securities.
(l) To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form; or in its
own name or in the name of a Custodian or a nominee or nominees, subject
in whichever case to proper safeguards according to the usual practice of
Massachusetts trust companies or investment companies.
7
<PAGE>
(m) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of
which is held in the Trust; to consent to any contract, lease, mortgage,
purchase, or sale of property by such corporation or concern; and to pay
calls or subscriptions with respect to any security held in the Trust.
(n) To compromise, arbitrate, or otherwise adjust claims in favor of
or against the Trust or any matter in controversy including, but not
limited to, claims for taxes.
(o) To make distributions of income and of capital gains to
Shareholders in the manner hereinafter provided.
(p) To borrow money from a bank for temporary or emergency purposes
and not for investment purposes. The Trustees shall not pledge, mortgage
or hypothecate the assets of the Trust except that, to secure borrowings,
the Trustees may pledge securities.
(q) To establish, from time to time, a minimum total investment for
Shareholders, and to require redemption of the Shares of any Shareholders
whose investment is less than such minimum upon giving notice to such
Shareholder. No one dealing with the Trustees shall be under any
obligation to make any inquiry concerning the authority of the Trustees,
or to see to the application of any payments made or property transferred
to the Trustees or upon their order.
(r) To retain an administrator, manager, investment advisers and/or
investment subadvisers.
(s) To establish separate and distinct series of shares with
separately defined investment objectives, policies and purposes, and to
allocate assets, liabilities and expenses of the Trust to a particular
series of Shares or to apportion the same among two or more series,
provided that any liability or expense incurred by a particular series of
Shares shall be payable solely out of the assets of that series.
(t) To establish separate and distinct classes for one or more
series, with each class having such rights and differences as determined
by the Trustees and to allocate assets, liabilities and expenses of a
particular class or to apportion the same among or between two or more
classes, provided that any liabilities or expenses incurred by a
particular class shall be payable solely out of the assets belonging to
that class.
(u) To purchase and pay for entirely out of Trust property such
insurance as they may deem necessary or appropriate for the conduct of the
business, including, without limitation, insurance policies insuring the
assets of the Trust and payment of distributions and principal on its
portfolio investments, and insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, investment advisers or managers,
principal underwriters, or independent contractors of the Trust
individually against all claims and liabilities of every nature arising by
reason of holding, being or having held any such office or position, or by
reason of any action alleged to have been taken or omitted by any such
8
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person as Shareholder, Trustee, officer, employee, agent, investment
adviser or manager, principal underwriter, or independent contractor,
including any action taken or omitted that may be determined to constitute
negligence, whether or not the Trust would have the power to indemnify
such person against such liability.
TRUSTEES AND OFFICERS AS SHAREHOLDERS
- -------------------------------------
SECTION 2. Subject only to the general limitations herein contained as to
the sale and purchase of Trust Shares and any restrictions that may be contained
in the Bylaws:
(a) Any Trustee, officer or other agent of the Trust may acquire, own
and dispose of Shares to the same extent as if he were not a Trustee,
officer or agent;
(b) The Trustees may issue and sell or cause to be issued and sold
Shares to (and buy such Shares from) any Interested Person.
ACTION BY THE TRUSTEES
- ----------------------
SECTION 3. The Trustees shall act by majority vote at a meeting duly
called or by unanimous written consent without a meeting or by telephone consent
provided a quorum of Trustees participate in any such telephonic meeting, unless
the 1940 Act requires that a particular action be taken only at an in-person
meeting of the Trustees. At any meeting of the Trustees, a majority of the
Trustees shall constitute a quorum. Meetings of the Trustees may be called
orally or in writing by the Chairman of the Trustees or by any two other
Trustees. Notice of the time, date and place of all meetings of the Trustees
shall be given to each Trustee as provided in the Bylaws.
Notice need not be given to any Trustee who attends the meeting without
objecting to the lack of notice or who executes a written waiver of notice with
respect to the meeting. Subject to the requirements of the 1940 Act, the
Trustees by majority vote may delegate to any one of their number the authority
to approve particular matters or take particular actions on behalf of the Trust.
CHAIRMAN OF THE TRUSTEES
- ------------------------
SECTION 4. The Trustees may appoint one of their number to be Chairman of
the Board of Trustees and to perform such duties as the Trustees may designate.
ARTICLE VI
----------
EXPENSES OF THE TRUST
---------------------
Subject to the provisions of Article III, Section 4, the Trustees are
authorized to have paid from the Trust estate or the assets belonging to the
Trust, as they deem fair and appropriate, expenses and disbursements of the
Trust, including, without limitation, fees and expenses of Trustees who are not
Interested Persons of the Trust, interest expenses, taxes, fees and commissions
9
<PAGE>
of every kind, expenses of pricing Trust portfolio securities, expenses of
issue, repurchase and redemption of Shares including expenses attributable to a
program of periodic repurchases or redemptions, expenses of registering and
qualifying the Trust and its Shares under federal and state laws and
regulations, expenses of rating the Trust by independent rating services,
charges of investment advisers, managers, administrators, Custodians, transfer
agents, and registrars, expenses of preparing and setting up in type
Prospectuses and Statements of Additional Information, expenses of printing and
distributing such documents sent to existing Shareholders, auditing and legal
expenses, reports to Shareholders, expenses of meetings of Shareholders and
proxy solicitations therefor, insurance expenses, association membership dues
and for such non-recurring items as may arise, including litigation to which the
Trust is a party, and for all losses and liabilities by them incurred in
administering the Trust, and for the payment of such expenses, disbursements,
losses and liabilities the Trustees shall have a lien on the assets belonging to
the Trust prior to any rights or interests of the Shareholders thereto. This
section shall not preclude the Trust from directly paying any of the
aforementioned fees and expenses.
ARTICLE VII
-----------
INVESTMENT ADVISER, PRINCIPAL UNDERWRITER AND TRANSFER AGENT
------------------------------------------------------------
INVESTMENT ADVISER
- ------------------
SECTION 1. Subject to a Majority Shareholder Vote when required by the
1940 Act, the Trustees may in their discretion from time to time enter into an
investment advisory or similar agreement(s) on behalf of the Trust or any series
thereof whereby the other party(ies) to such agreement(s) shall undertake to
furnish the Trustees such investment advisory, statistical and research
facilities and services and such other facilities and services, if any, and all
upon such terms and conditions as the Trustees may in their discretion
determine. Notwithstanding any provisions of this Declaration of Trust, the
Trustees may authorize the investment adviser(s) (subject to such general or
specific instructions as the Trustees may from time to time adopt) to effect
purchases, sales or exchanges of portfolio securities and other investment
instruments of the Trust on behalf of the Trustees or may authorize any officer,
agent, or Trustee to effect such purchases, sales or exchanges pursuant to
recommendations of the investment adviser(s) (and all without further action by
the Trustees). Any such purchases, sales and exchanges shall be deemed to have
been authorized by all of the Trustees.
The Trustees may, subject to applicable requirements of the 1940 Act,
including those relating to Shareholder approval, authorize the investment
adviser to employ one or more subadvisers from time to time to perform such of
the acts and services of the investment adviser, and upon such terms and
conditions, as may be agreed upon between the investment adviser and subadviser.
Notwithstanding any contrary provisions herein, the Trustees can enter
into investment advisory or investment subadvisory agreements without
Shareholder approval to the extent permitted by an exemptive order of the U.S.
Securities and Exchange Commission ("SEC") or similar relief granted by the SEC
or its staff, including a staff no-action position.
10
<PAGE>
PRINCIPAL UNDERWRITER
- ---------------------
SECTION 2. The Trustees may in their discretion from time to time enter
into an agreement(s) on behalf of the Trust or any series or class thereof
providing for the sale of the Shares, whereby the Trust may either agree to sell
the Shares to the other party to the agreement or appoint such other party its
sales agent for such Shares. In either case, the agreement shall be on such
terms and conditions as may be prescribed in the Bylaws, if any, and such
further terms and conditions as the Trustees may in their discretion determine
to be not inconsistent with the provisions of this Article VII, or of the
Bylaws, if any; and such agreement may also provide for the repurchase or sale
of Shares by such other party as principal or as agent of the Trust.
Alternatively, or in addition thereto, the Trust can directly distribute its
Shares and, if necessary in connection with such distribution, register as a
broker-dealer in appropriate jurisdictions. [The Trustees may in their
discretion adopt a plan or plans of distribution and enter into any related
agreements whereby the Trust finances directly or indirectly any activity that
is primarily intended to result in sales of shares.
TRANSFER AGENT
- --------------
SECTION 3. The Trustees may in their discretion from time to time enter
into a transfer agency and Shareholder service agreement whereby the other party
shall undertake to furnish the Trust with transfer agency and Shareholder
services. The agreement shall be on such terms and conditions as the Trustees
may in their discretion determine are not inconsistent with the provisions of
this Declaration of Trust or of the Bylaws, if any. Such services may be
provided by one or more entities including one or more agents of such parties.
PARTIES TO CONTRACT
- -------------------
SECTION 4. Any agreement of the character described in Sections 1, 2 and 3
of this Article VII or in Article IX hereof may be entered into with any
corporation, firm, partnership, trust or association, although one or more of
the Trustees or officers of the Trust may be an officer, director, trustee,
shareholder, or member of such other party to the agreement, and no such
agreement shall be invalidated or rendered voidable by reason of the existence
of any relationship, nor shall any person holding such relationship be liable
merely by reason of such relationship for any loss or expense to the Trust under
or by reason of said agreement or accountable for any profit realized directly
or indirectly therefrom, provided that the agreement when entered into was
reasonable and fair and not inconsistent with the provisions of this Article VII
or the Bylaws, if any. The same person (including a firm, corporation,
partnership, trust, or association) may be the other party to agreements entered
into pursuant to Sections 1, 2 and 3 above or Article IX, and any individual may
be financially interested or otherwise affiliated with persons who are parties
to any or all of the agreements mentioned in this Section 4.
PROVISIONS AND AMENDMENTS
- -------------------------
SECTION 5. To the extent that Section 15 of the 1940 Act is applicable,
any contract entered into pursuant to Sections 1 and 2 of this Article VII shall
be consistent with and subject to the requirements of Section 15 of the 1940 Act
with respect to its continuance in effect, its termination, and the method of
11
<PAGE>
authorization and approval of such agreement or renewal or amendment thereof,
subject to any exemptive or similar relief granted by the SEC or its Staff,
including a staff no-action position.
ARTICLE VIII
------------
SHAREHOLDERS' VOTING POWERS AND MEETINGS
----------------------------------------
VOTING POWERS
- -------------
SECTION 1. The Shareholders shall have power to vote: (i) for the election
of Trustees as provided in Article IV, Section 2, (ii) for the removal of
Trustees as provided in Article IV, Section 3(c), (iii) with respect to any
investment advisory contract as provided in Article VII, (iv) with respect to
the amendment of this Declaration of Trust as provided in Article XII, Section
7, (v) to the same extent as the shareholders of a Massachusetts business
corporation, as to whether or not a court action, proceeding or claim should be
brought or maintained derivatively or as a class action on behalf of the Trust
or the Shareholders, provided, however, that a Shareholder of a particular
series or class shall not be entitled to bring any derivative or class action on
behalf of any other series or class of the Trust, and (vi) with respect to such
additional matters relating to the Trust as may be required or authorized by
law, by this Declaration of Trust, or the Bylaws of the Trust, if any, or any
registration of the Trust with the Commission or any state, as the Trustees may
consider desirable. On any matter submitted to a vote of the Shareholders, all
Shares shall be voted in the aggregate and not by individual series or class;
except that, (i) when required by the 1940 Act or (ii) when the Trustees have
determined that the matter affects only the interests of one or more series or
classes, then only the Shareholders of such series or classes shall be entitled
to vote thereon. Each whole Share shall be entitled to one vote as to any matter
on which it is entitled to vote, and each fractional Share shall be entitled to
a proportionate fractional vote. There shall be no cumulative voting in the
election of Trustees. Shares may be voted in person or by proxy. Until Shares
are issued, the Trustees may exercise all rights of Shareholders and may take
any action required or permitted by law, this Declaration of Trust or any Bylaws
of the Trust to be taken by Shareholders.
MEETINGS
- --------
SECTION 2. Special meetings of the Shareholders may be called by the
Trustees and may be held at the principal office of the Trust or such other
place as the Trustees may designate. Special meetings also shall be called by
the Trustees for the purpose of removing one or more Trustees upon the written
request for such a meeting by Shareholders owning at least 10 percent of the
outstanding Shares entitled to vote. Whenever ten or more Shareholders meeting
the qualifications set forth in Section 16(c) of the 1940 Act, as the same may
be amended from time to time, seek the opportunity of furnishing materials to
the other Shareholders with a view to obtaining signatures on such a request for
a meeting, the Trustees shall comply with the provisions of said Section 16(c)
with respect to providing such Shareholders access to the list of the
Shareholders of record of the Trust or the mailing of such materials to such
Shareholders of record. Shareholders shall be entitled to at least 15 days'
notice of any meeting.
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<PAGE>
QUORUM AND REQUIRED VOTE
- ------------------------
SECTION 3. A majority of Shares entitled to vote in person or by proxy
shall be a quorum for the transaction of business at a Shareholders' meeting,
except that where any provision of law or of this Declaration of Trust permits
or requires that holders of any series or class shall vote, as a series or
class, then a majority of the aggregate number of Shares of that series or class
entitled to vote shall be necessary to constitute a quorum for the transaction
of business by that series or class. Any lesser number shall be sufficient for
adjournments. Any adjourned session or sessions may be held, within a reasonable
time after the date set for the original meeting, without the necessity of
further notice. Except when a larger vote is required by any provision of this
Declaration of Trust, the Bylaws or law, a majority of the Shares voted in
person or by proxy shall decide any questions and a plurality shall elect a
Trustee, provided that where any provision of law or of this Declaration of
Trust permits or requires that the holders of any series or class shall vote as
a series or class, then a majority of the Shares of that series or class voted
on the matter shall decide that matter insofar as that series or class is
concerned.
ARTICLE IX
----------
CUSTODIAN
---------
APPOINTMENT AND DUTIES
- ----------------------
SECTION 1. The Trustees shall at all times employ a bank or trust company
having capital, surplus and undivided profits of at least two million dollars
($2,000,000) as Custodian on such basis of compensation as may be agreed upon
between the Trustees and the Custodian. The Custodian shall have authority as
agent for the Trust, but subject to such restrictions, limitations and other
requirements, if any, as may be contained in the Bylaws of the Trust:
(a) to hold the securities owned by the Trust and deliver the same
upon written order;
(b) to receive and take receipt for any moneys due to the Trust and
deposit the same in its own banking department or elsewhere as the
Trustees may direct;
(c) to disburse such funds upon orders or vouchers;
(d) to keep the books and accounts of the Trust and furnish clerical
and accounting services; and
(e) to compute, if authorized to do so by the Trustees, the Trust's
Net Asset Value in accordance with the provisions hereof.
If so directed by a Majority Shareholder Vote, the Custodian shall deliver
and pay over all property of the Trust held by it as specified in such vote.
13
<PAGE>
EMPLOYMENT OF SUB-CUSTODIANS
- ----------------------------
SECTION 2. The Trustees may also authorize the Custodian to employ one or
more sub-Custodians from time to time to perform such of the acts and services
of the Custodian, and upon such terms and conditions, as may be agreed upon
between the Custodian and such sub-Custodian and approved by the Trustees,
provided that in every case such sub-Custodian shall be (a) a bank or trust
company organized under the laws of the United States or one of the states
thereof and having capital, surplus and undivided profits of at least two
million dollars ($2,000,000) or such other person as may be permitted by the
Commission, or otherwise in accordance with the 1940 Act as from time to time
amended, or (b) an eligible foreign custodian in accordance with Rule 17f-5
under the 1940 Act or any such applicable successor regulation.
CENTRAL DEPOSITORY SYSTEM
- -------------------------
SECTION 3. Subject to such rules, regulations and orders as the Commission
may adopt, the Trustees may direct the Custodian to deposit all or any part of
the securities owned by the Trust in a system for the central handling of
securities established by a national securities exchange or a national
securities association registered with the Commission under the Securities
Exchange Act of 1934, as amended, or such other person as may be permitted by
the Commission, or otherwise in accordance with the 1940 Act as from time to
time amended, pursuant to which system all securities of any particular class of
any issuer deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust.
ARTICLE X
---------
DISTRIBUTIONS AND REDEMPTIONS
-----------------------------
DISTRIBUTIONS
- -------------
SECTION 1.
(a) The Trustees may from time to time declare and pay dividends. The
amount of such dividends and the payment of them shall be wholly in the
discretion of the Trustees.
(b) The Trustees shall have power, to the fullest extent permitted by
the laws of Massachusetts, at any time to declare and cause to be paid
dividends on Shares from assets of a particular series, which dividends
and other distributions, at the election of the Trustees, may be paid
daily or otherwise pursuant to a standing resolution or resolutions
adopted only once or with such frequency as the Trustees may determine,
and may be payable in Shares at the election of each Shareholder. All
dividends and other distributions on Shares of a particular series shall
be distributed pro rata to the holders of that series in proportion to the
number of Shares of that series held by such holders at the date and time
of record established for the payment of such dividends or distributions,
14
<PAGE>
except that such dividends and other distributions shall appropriately
reflect expenses allocated to a particular class of such series.
(c) Anything in this Declaration of Trust to the contrary
notwithstanding, the Trustees may at any time declare and distribute pro
rata among the Shareholders of a particular series of a class thereof a
"share dividend."
REDEMPTIONS
- -----------
SECTION 2. In case any Shareholder of record desires to dispose of his
Shares, the shareholder may deposit at the office of the transfer agent or other
authorized agent of the Trust a written request or such other form of request as
the Trustees may from time to time authorize, requesting that the Trust purchase
the Shares in accordance with this Section 2; and the Shareholder so requesting
shall be entitled to require the Trust to purchase, and the Trust or the
principal underwriter of the Trust shall purchase, said Shares, but only at the
Net Asset Value thereof (as described in Section 3 hereof) less such charges as
are determined by the Trustees and described in the Trust's Registration
Statement under the Securities Act of 1933, as amended, or any prospectus or
statement of additional information contained therein, as supplemented. The
Trust shall make payment for any such Shares to be redeemed, as aforesaid, in
cash to the extent required by federal law, and securities from Trust assets,
and payment for such Shares shall be made by the Trust or the principal
underwriter to the Shareholder of record within seven (7) days after the date
upon which the request is effective. Provided, however, that if Shares being
redeemed have been purchased by check, the series may postpone payment until the
Trust has assurance that good payment has been collected for the purchase of the
Shares. The Trust may require Shareholders to pay a sales charge to the Trust,
the underwriter or any other person designated by the Trustees upon redemption
or repurchase of Shares of any series or class in such amount as shall be
determined from time to time by the Trustees. The amount of such sales charge
may, but need not, vary depending on various factors, including without
limitation the holding period of the redeemed or repurchase Shares. The Trustees
also may charge a redemption or repurchase fee in such amount as may be
determined from time to time by the Trustees.
DETERMINATION OF NET ASSET VALUE AND VALUATION OF PORTFOLIO ASSETS
- ------------------------------------------------------------------
SECTION 3. The term "Net Asset Value" shall mean that amount by which the
assets of any series or class thereof exceed its liabilities, all as determined
by or under the direction of the Trustees. Such value shall be determined on
such days and at such times as the Trustees may determine. Such determination
shall be made with respect to securities for which market quotations are readily
available, at the market value of such securities; and with respect to other
securities and assets, at the fair value as determined in good faith by the
Trustees, provided, however, that the Trustees, without Shareholder approval,
may alter the method of appraising portfolio securities insofar as permitted
under the 1940 Act and the rules, regulations and interpretations thereof
promulgated or issued by the Commission or insofar as permitted by any Order of
the Commission. The Trustees may delegate any powers and duties under this
Section 3 with respect to appraisal of assets and liabilities. At any time the
Trustees may cause the value per Share last determined to be determined again in
15
<PAGE>
similar manner and may fix the time when such redetermined value shall become
effective.
SUSPENSION OF THE RIGHT OF REDEMPTION
- -------------------------------------
SECTION 4. The Trustees may declare a suspension of the right of
redemption or postpone the date of payment to the extent as permitted under the
1940 Act. Such suspension shall take effect at such time as the Trustees shall
specify but not later than the close of business on the business day next
following the declaration of suspension, and thereafter there shall be no right
of redemption or payment until the Trustees shall declare the suspension at an
end. In the case of a suspension of the right of redemption, a Shareholder may
either withdraw his or her request for redemption or receive payment based on
the Net Asset Value per Share existing after the termination of the suspension.
ARTICLE XI
----------
LIMITATION OF LIABILITY AND INDEMNIFICATION
-------------------------------------------
LIMITATION OF LIABILITY
- -----------------------
SECTION 1. Provided they have exercised reasonable care and have acted
under the reasonable belief that their actions are in the best interest of the
Trust, the Trustees shall not be responsible for or liable in any event for
neglect or wrongdoing of them or any officer, agent, employee or investment
adviser of the Trust, but nothing contained herein shall protect any Trustee
against any liability to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
INDEMNIFICATION
- ---------------
SECTION 2.
(a) Subject to the exceptions and limitations contained in paragraph
(b) below:
(i) every person who is, or has been, a Trustee or officer of
the Trust (hereinafter referred to as "Covered Person") shall be
indemnified by the Trust to the fullest extent permitted by law
against liability and against all expenses reasonably incurred or
paid by him in connection with any claim, action, suit or proceeding
in which he becomes involved as a party or otherwise by virtue of his
being or having been a Trustee or officer and against amounts paid or
incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall
apply to all claims, actions, suits or proceedings (civil, criminal
or other, including appeals), actual or threatened while in office or
thereafter, and the words "liability" and "expenses" shall include,
16
<PAGE>
without limitation, attorneys' fees, costs, judgments, amounts paid
in settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered
Person:
(i) who shall have been adjudicated by a court or body before
which the proceeding was brought (A) to be liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his office or (B) not to have acted in good faith in the
reasonable belief that his action was in the best interest of the
Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office, (A) by the court or
other body approving the settlement; (B) by at least a majority of
those Trustees who are neither interested persons of the Trust nor
are parties to the matter based upon a review of readily available
facts (as opposed to a full trial-type inquiry); or (C) by written
opinion of independent legal counsel based upon a review of readily
available facts (as opposed to a full trial-type inquiry); provided,
however, that any Shareholder may, by appropriate legal proceedings,
challenge any such determination by the Trustees, or by independent
counsel.
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not
be exclusive of or affect any other rights to which any Covered Person may
now or hereafter be entitled, shall continue as to a person who has ceased
to be such Trustee or officer and shall inure to the benefit of the heirs,
executors and administrators of such a person. Nothing contained herein
shall affect any rights to indemnification to which Trust personnel, other
than Trustees and officers, and other persons may be entitled by contract
or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character
described in paragraph (a) of this Section 2 may be paid by the Trust from
time to time prior to final disposition thereof upon receipt of an
undertaking by or on behalf of such Covered Person that such amount will
be paid over by him to the Trust if it is ultimately determined that he is
not entitled to indemnification under this Section 2; provided, however,
that:
(i) such Covered Person shall have provided appropriate security
for such undertaking,
(ii) the Trust is insured against losses arising out of any such
advance payments or
(iii) either a majority of the Trustees who are neither
interested persons of the Trust nor parties to the matter, or
independent legal counsel in a written opinion, shall have
17
<PAGE>
determined, based upon a review of readily available facts (as
opposed to a trial-type inquiry or full investigation), that there is
reason to believe that such Covered Person will be found entitled to
indemnification under this Section 2.
SHAREHOLDERS
- ------------
SECTION 3. In case any Shareholder or former Shareholder of the Trust
shall be held to be personally liable solely by reason of his or her being or
having been a Shareholder and not because of his acts or omissions or for some
other reason, the Shareholder or former Shareholder (or his heirs, executors,
administrators or other legal representatives or in the case of a corporation or
other entity, its corporate or other general successor) shall be entitled out of
the assets belonging to the applicable series to be held harmless from and
indemnified against all loss and expense arising from such liability. The
applicable series shall, upon request by the Shareholder, assume the defense of
any claim made against the Shareholder for any act or obligation of the Trust
and satisfy any judgment thereon.
ARTICLE XII
-----------
MISCELLANEOUS
-------------
TRUST NOT A PARTNERSHIP
- -----------------------
SECTION 1. It is hereby expressly declared that a trust and not a
partnership is created hereby. No Trustee hereunder shall have any power to bind
personally either the Trust's officers or any Shareholder. All persons extending
credit to, contracting with or having any claim against the Trust or the
Trustees shall look only to the assets of the Trust or of such series for
payment under such credit, contract or claim; and neither the Shareholders nor
the Trustees, nor any of their agents, whether past, present or future, shall be
personally liable therefor. Nothing in this Declaration of Trust shall protect a
Trustee against any liability to which the Trustee would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of the office of Trustee hereunder.
TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR SURETY
- -------------------------------------------------------------
SECTION 2. The exercise by the Trustees of their powers and discretion
hereunder in good faith and with reasonable care under the circumstances then
prevailing, shall be binding upon everyone interested. Subject to the provisions
of Section 1 of this Article XII and to Article XI, the Trustees shall not be
liable for errors of judgment or mistakes of fact or law. The Trustees may take
advice of counsel or other experts with respect to the meaning and operation of
this Declaration of Trust, and subject to the provisions of Section 1 of this
Article XII and to Article XI, shall be under no liability for any act or
omission in accordance with such advice or for failing to follow such advice.
The Trustees shall not be required to give any bond as such, nor any surety if a
bond is obtained.
18
<PAGE>
ESTABLISHMENT OF RECORD DATES
- -----------------------------
SECTION 3. The Trustees may close the stock transfer books of the Trust
for a period not exceeding 60 days preceding the date of any meeting of
Shareholders, or the date for the payment of any dividends, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
Shares shall go into effect; or in lieu of closing the stock transfer books as
aforesaid, the Trustees may fix in advance a date, not exceeding 60 days
preceding the date of any meeting of Shareholders, or the date for payment of
any dividend, or the date for the allotment of rights, or the date when any
change or conversion or exchange of Shares shall go into effect, as a record
date for the determination of the Shareholders entitled to notice of, and to
vote at, any such meeting, or entitled to receive payment of any such dividend,
or to any such allotment of rights, or to exercise the rights in respect of any
such change, conversion or exchange of Shares, and in such case such
Shareholders and only such Shareholders as shall be Shareholders of record on
the date so fixed shall be entitled to such notice of, and to vote at, such
meeting, or to receive payment of such dividend, or to receive such allotment or
rights, or to exercise such rights, as the case may be, notwithstanding any
transfer of any Shares on the books of the Trust after any such record date
fixed as aforesaid.
TERMINATION OF TRUST
- --------------------
SECTION 4.
----------
(a) This Trust shall continue without limitation of time but subject
to the provisions of paragraph (b) of this Section 4.
(b) Subject to a Majority Shareholder Vote, the Trustees may:
(i) sell and convey the assets of the Trust or any affected
series to another trust, partnership, association or corporation
organized under the laws of any state which is an open-end management
investment company as defined in the 1940 Act, for adequate
consideration which may include the assumption of all outstanding
obligations, taxes and other liabilities; accrued or contingent, of
the Trust and which may include shares of beneficial interest or
stock of such trust, partnership, association or corporation; or
(ii) at any time sell and convert into money all of the assets
of the Trust.
Upon making provision for the payment of all such liabilities in
either (i) or (ii), by such assumption or otherwise, the Trustees shall
distribute the remaining proceeds or assets (as the case may be) ratably
among the Shareholders or any affected series then outstanding; however,
the payment to any particular class within such series may be reduced by
any fees, expenses or charges allocated to that class. Nothing in this
Declaration of Trust shall preclude the Trustees from distributing such
remaining proceeds or assets so that holders of the Shares of a particular
class of the Trust or any affected series receive as their ratable
distribution Shares solely of an analogous class, as determined by the
Trustees, of such series, trust, partnership, association or corporation.
19
<PAGE>
The Trustees may take any of the actions specified in clauses (i) and
(ii) above without obtaining a Majority Shareholder Vote of any series or
class or of the Trust if a majority of the Trustees makes a determination
that the continuation of a series or class or the Trust is not in the best
interests of such series or class, or the Trust or their respective
Shareholders as a result of factors or events adversely affecting the
ability of such series or class or the Trust to conduct its business and
operations in an economically viable manner. Such factors and events may
include the inability of a series or class, or the Trust to maintain its
assets at an appropriate size, changes in laws or regulations governing
the series or class, or the Trust or affecting assets of the type in which
such series or class, or the Trust invests or economic developments or
trends having a significant adverse impact on the business or operations
of such series or class, or the Trust.
(c) Upon completion of the distribution of the remaining assets as
provided in paragraph (b), the Trust shall terminate and the Trustees
shall be discharged of any and all further liabilities and duties
hereunder and the right, title and interest of all parties shall be
canceled and discharged.
FILING OF COPIES, REFERENCES, HEADINGS
- --------------------------------------
SECTION 5. The original or a copy of this instrument and of each
declaration of trust supplemental hereto shall be kept at the office of the
Trust where it may be inspected by any Shareholder. A copy of this instrument
and of each supplemental declaration of trust shall be filed by the Trustees
with the Secretary of the Commonwealth of Massachusetts and any other
governmental office where such filing may from time to time be required. Anyone
dealing with the Trust may rely on a certificate by an officer or Trustee of the
Trust as to whether or not any such supplemental declarations of trust have been
made and as to any matters in connection with the Trust hereunder, and with the
same effect as if it were the original, may rely on a copy certified by an
officer or Trustee of the Trust to be a copy of this instrument or of any such
supplemental declaration of trust. In this instrument or in any such
supplemental declaration of trust, references to this instrument, and the
expressions "herein," "hereof" and "hereunder," shall be deemed to refer to this
instrument as amended or affected by any such supplemental declaration of trust.
Headings are placed herein for convenience of reference only and in case of any
conflict, the text of this instrument, rather than the headings, shall control.
This instrument may be executed in any number of counterparts each of which
shall be deemed an original.
APPLICABLE LAW
- --------------
SECTION 6. The trust set forth in this instrument is made in the
Commonwealth of Massachusetts, and it is created under and is to be governed by
and construed and administered according to the laws of said Commonwealth. The
Trust shall be of the type commonly called a Massachusetts business trust, and
without limiting the provisions hereof, the Trust may exercise all powers which
are ordinarily exercised by such a Trust.
20
<PAGE>
AMENDMENTS
- ----------
SECTION 7. This instrument can be amended, supplemented or restated by a
majority vote of the Trustees. Amendments, supplements or restatements having
the purpose of materially decreasing the rights of shareholders in regard to
liability and indemnification, as set forth in Article III Section 6 and Article
XI Section 3, respectively, shall require a Majority Shareholder Vote. Copies of
the amended, supplemented or restated Declaration of Trust shall be filed as
specified in Section 5 of this Article XII.
FISCAL YEAR
- -----------
SECTION 8. The fiscal year of the Trust shall end on a specified date as
determined by the Trustees; provided, however, that the Trustees may, without
Shareholder approval, change the fiscal year of the Trust.
USE OF THE WORDS "AMERICAN" AND "AMERICAN AIRLINES"
- ---------------------------------------------------
SECTION 9. AMR Corporation has consented to the use by the Trust of the
identifying words "American Select Funds." Such consent is conditioned upon the
employment of AMR Investment Services, Inc., its successors or its affiliated
companies as investment adviser or manager of the Trust. As between the Trust
and itself, AMR Corporation controls the use of the name of the Trust insofar as
such name contains the identifying words "American Select Funds." AMR
Corporation may from time to time use the identifying words "American Select
Funds" in other connections and for other purposes, including, without
limitation, in the names of other corporations or businesses which it may
manage, advise, sponsor or own, or in which it may have a financial interest.
AMR Corporation may require the Trust to cease using the identifying words
"American Select Funds" in the name of the Trust if the Trust ceases to employ
AMR Investment Services, Inc. or another subsidiary or affiliate of AMR
Corporation as investment adviser or manager.
NOTICE TO OTHER PARTIES
- -----------------------
SECTION 10. Every note, bond, contract, instrument, certificate or
undertaking made or issued by the Trustees or by any officers or officer shall
give notice that this Declaration of Trust is on file with the Secretary of the
Commonwealth of Massachusetts and shall recite that the same was executed or
made by or on behalf of the Trust or by them as Trustees or Trustee or as
officers or officer and not individually and that the obligations of such
instrument are not binding upon any of them or the Shareholders individually but
are binding only upon the assets and property of the Trust, and may contain such
further recital as he and she or they may deem appropriate, but the omission
thereof shall not operate to bind any Trustees or Trustee or officers or officer
or Shareholders or Shareholder individually.
21
<PAGE>
IN WITNESS WHEREOF, the undersigned, being the sole initial Trustee of
American Select Funds, have executed this instrument.
8/18/99 /S/ WILLIAM F. QUINN
- ------------------ ---------------------------
Date William F. Quinn
Trustee
TRUSTEE'S ADDRESS
-----------------
William F. Quinn
4333 Amon Carter Boulevard
MD 5645
Fort Worth, Texas 76155
22
AMERICAN SELECT FUNDS
A MASSACHUSETTS BUSINESS TRUST
BY-LAWS
AUGUST 19, 1999
<PAGE>
AMERICAN SELECT FUNDS
BYLAWS
TABLE OF CONTENTS
PAGE
ARTICLE I - OFFICERS AND THEIR ELECTION......................................1
SECTION 1.: OFFICERS.......................................................1
SECTION 2.: ELECTION OF OFFICERS...........................................1
SECTION 3.: RESIGNATIONS AND REMOVALS......................................1
SECTION 4.: VACANCIES AND NEWLY CREATED OFFICES............................1
ARTICLE II - POWERS AND DUTIES OF OFFICERS AND TRUSTEES.......................1
SECTION 1: MANAGEMENT OF THE TRUST -GENERAL................................1
SECTION 2: RIGHT TO ENGAGE IN BUSINESS.....................................2
SECTION 3: EXECUTIVE AND OTHER COMMITTEES..................................2
SECTION 4: CHAIRMAN OF THE TRUSTEES........................................2
SECTION 5: PRESIDENT.......................................................2
SECTION 6: TREASURER.......................................................2
SECTION 7: SECRETARY.......................................................3
SECTION 8: VICE PRESIDENT..................................................3
SECTION 9: ASSISTANT TREASURER.............................................3
SECTION 10: ASSISTANT SECRETARY............................................3
SECTION 11: OTHER OFFICERS.................................................3
ARTICLE III - SHAREHOLDERS' MEETINGS..........................................3
SECTION 1: SPECIAL MEETINGS................................................3
SECTION 2: NOTICE..........................................................4
SECTION 3: PLACE OF MEETING................................................4
SECTION 4: BALLOTS.........................................................4
SECTION 5: PROXIES.........................................................4
SECTION 6: ACTION WITHOUT A MEETING........................................4
ARTICLE IV - TRUSTEES' MEETINGS...............................................5
SECTION 1: SPECIAL MEETINGS................................................5
SECTION 2: REGULAR MEETINGS................................................5
SECTION 3: QUORUM..........................................................5
SECTION 4: NOTICE..........................................................5
SECTION 5: SPECIAL ACTION..................................................5
SECTION 6: ACTION BY CONSENT...............................................6
ARTICLE V - SHARES OF BENEFICIAL INTEREST.....................................6
SECTION 1: BENEFICIAL INTEREST.............................................6
SECTION 2: TRANSFER OF SHARES..............................................6
SECTION 3: EQUITABLE INTEREST NOT RECOGNIZED...............................6
ARTICLE VI - INSPECTION OF BOOKS..............................................6
ARTICLE VII - FISCAL YEAR.....................................................7
ARTICLE VIII - AMENDMENTS.....................................................7
ARTICLE IX - PRINCIPAL OFFICE OF THE TRUST....................................7
<PAGE>
AMERICAN SELECT FUNDS
---------------------
BYLAWS
------
These Amended Bylaws of the American Select Funds (the "Trust"), a
Massachusetts business trust, are subject to the Trust's Declaration of Trust as
from time to time amended.
ARTICLE I
---------
OFFICERS AND THEIR ELECTION
---------------------------
OFFICERS
- --------
SECTION 1. The officers of the Trust shall be a President, a Treasurer, a
Secretary, and such other officers as the Trustees may from time to time elect.
It shall not be necessary for any Trustee or officer to be a holder of shares in
the Trust.
ELECTION OF OFFICERS
- --------------------
SECTION 2. The President, Treasurer and Secretary shall be chosen annually
by the Trustees. Two or more offices may be held by a single person except the
offices of President and Secretary. The officers shall hold office until their
successors are chosen and qualified.
RESIGNATIONS AND REMOVALS
- -------------------------
SECTION 3. Any officer of the Trust may resign by filing a written
resignation with the President, the Trustees or the Secretary, which resignation
shall take effect on being so filed or at such time as may be therein specified.
The Trustees may at any meeting remove any officer by a majority vote of the
voting Trustees.
VACANCIES AND NEWLY CREATED OFFICES
- -----------------------------------
SECTION 4. If any vacancy shall occur in any office or if any new office
shall be created, such vacancies or newly created offices may be filled by the
Trustees at any regular or special meeting of the Trustees.
ARTICLE II
----------
POWERS AND DUTIES OF OFFICERS AND TRUSTEES
------------------------------------------
MANAGEMENT OF THE TRUST - GENERAL
- ---------------------------------
SECTION 1. The business and affairs of the Trust shall be managed by the
Trustees, and they shall have all powers necessary and desirable to carry out
their responsibilities, so far as such powers are not inconsistent with the laws
of the Commonwealth of Massachusetts, the Declaration of Trust, or these Bylaws.
1
<PAGE>
RIGHT TO ENGAGE IN BUSINESS
- ---------------------------
SECTION 2. Any officer or Trustee of the Trust, the investment adviser,
the manager, the administrator and any officers or directors of the investment
adviser, manager or administrator may have personal business interests and may
engage in personal business activities.
EXECUTIVE AND OTHER COMMITTEES
- ------------------------------
SECTION 3. The Trustees may elect from their own number an executive
committee which shall have the power and duty to conduct the current and
ordinary business of the Trust, including the purchase and sale of securities,
while the Trustees are not in session, and such other powers and duties as the
Trustees may from time to time delegate to such committee. The Trustees also may
elect from their own number other committees from time to time. The number
composing such committees and the powers conferred upon the same are to be
determined by vote of the Trustees.
CHAIRMAN OF THE TRUSTEES
- ------------------------
SECTION 4. The Trustees may, but need not, appoint from among their number
a Chairman. He or she shall perform such duties as the Trustees may from time to
time designate.
PRESIDENT
- ---------
SECTION 5. The President shall be the chief executive officer of the Trust
and, subject to the supervision of the Trustees, shall have general supervision
over the business and policies of the Trust. When present, he or she shall
preside at all meetings of the Shareholders and the Trustees, and he or she may,
subject to the approval of the Trustees, appoint a Trustee to preside at such
meetings in his or her absence. The President shall perform such duties
additional to all of the foregoing as the Trustees may from time to time
designate.
TREASURER
- ---------
SECTION 6. The Treasurer shall be the principal financial and accounting
officer of the Trust. He or she shall deliver all funds and securities of the
Trust that may come into his or her hands to such bank or trust company as the
Trustees shall employ as Custodian. He or she shall have the custody of the seal
of the Trust. He or she shall make annual reports regarding the business and
condition of the Trust, which reports shall be preserved in Trust records, and
he or she shall furnish such other reports regarding the business and condition
of the Trust as the Trustees may from time to time require. The Treasurer shall
perform such additional duties as the Trustees may from time to time designate.
2
<PAGE>
SECRETARY
- ---------
SECTION 7. The Secretary shall record in books kept for the purpose all
votes and proceedings of the Trustees and the Shareholders at their respective
meetings. The Secretary shall perform such additional duties as the Trustees may
from time to time designate.
VICE PRESIDENT
- --------------
SECTION 8. Any Vice President of the Trust shall perform such duties as
the Trustees may from time to time designate.
ASSISTANT TREASURER
- -------------------
SECTION 9. Any Assistant Treasurer of the Trust shall perform such duties
as the Trustees may from time to time designate.
ASSISTANT SECRETARY
- -------------------
SECTION 10. Any Assistant Secretary of the Trust shall perform such duties
as the Trustees may from time to time designate.
OTHER OFFICERS
- --------------
SECTION 11. The Trustees from time to time may appoint such other officers
or agents as they may deem advisable, each of whom shall have such title, hold
office for such period, have such authority and perform such duties as the
Trustees may determine. The Trustees from time to time may delegate to one or
more officers or agents the power to appoint any such subordinate officers or
agents and to prescribe their respective rights, terms of office, authorities
and duties.
ARTICLE III
-----------
SHAREHOLDERS' MEETINGS
----------------------
SPECIAL MEETINGS
- ----------------
SECTION 1. A special meeting of the Shareholders shall be called by the
Secretary whenever (a) ordered by the Trustees or (b) requested, for the purpose
of removing a Trustee from office, in writing by the holder or holders of at
least 10% of the outstanding Shares entitled to vote. If the Secretary, when so
ordered or requested, refuses or neglects for more than 30 days to call such
special meeting, the Trustees or the Shareholders so requesting may, in the name
of the Secretary, call the meeting by giving notice thereof in the manner
required when notice is given by the Secretary. If the meeting is a meeting of
the shareholders of one or more series or classes of shares, but not a meeting
of all shareholders of the Trust, then only the shareholders of such one or more
series shall be entitled to notice of and to vote at such meeting.
3
<PAGE>
NOTICE
- ------
SECTION 2. Except as provided above, notices of the place, date and hour,
and purpose(s) for which any special meeting of the Shareholders is called shall
be given by the Secretary by delivering or mailing, postage prepaid, to each
Shareholder entitled to vote at such meeting, a written or printed notification
of such meeting, at least 15 days before the meeting, to such address as may be
registered with the Trust by the Shareholder.
PLACE OF MEETING
- ----------------
SECTION 3. All special meetings of the Shareholders shall be held at the
principal place of business of the Trust or at such other place in the United
States as the Trustees may designate.
BALLOTS
- -------
SECTION 4. The vote upon any question shall be by ballot whenever
requested by any person entitled to vote, but, unless such a request is made,
voting may be conducted in any way approved by the meeting.
PROXIES
- -------
SECTION 5. Shareholders entitled to vote may vote either in person or by
proxy, provided that an instrument authorizing such proxy to act is executed by
the Shareholder in writing and dated not more than eleven months before the
meeting, unless the instrument specifically provides for a longer period.
Shareholders may have their votes recorded by telephone or placed through the
Internet, at which time Shareholders may authorize proxies to vote their Shares
in accordance with their instructions. Shareholders will not execute telephone
or Internet proxies in writing, but will receive a confirmation of their
instructions by mail and be provided an opportunity to correct any incorrect
instructions. Proxies shall be delivered to the Secretary of the Trust or other
person responsible for recording the proceedings before being voted. A proxy
with respect to shares held in the name of two or more persons shall be valid if
executed by one of them unless at or prior to exercise of such proxy the Trust
receives a specific written notice to the contrary from any one of them. Unless
otherwise specifically limited by their terms, proxies shall entitle the holder
thereof to vote at any adjournment of a meeting. A proxy purporting to be
exercised by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise and the burden of providing invalidity
shall rest on the challenger. At all meetings of the Shareholders, unless the
voting is conducted by inspectors, all questions relating to the qualifications
of voters, the validity of proxies, and the acceptance or rejection of votes
shall be decided by the chairman of the meeting.
ACTION WITHOUT A MEETING
- ------------------------
SECTION 6. Any action to be taken by Shareholders may be taken without a
meeting if all Shareholders entitled to vote on the matter consent to the action
in writing and the written consents are filed with the records of meetings of
4
<PAGE>
Shareholders of the Trust. Such consent shall be treated for all purposes as a
vote at a meeting.
ARTICLE IV
----------
TRUSTEES' MEETINGS
------------------
SPECIAL MEETINGS
- ----------------
SECTION 1. Special meetings of the Trustees shall be called by the
Secretary at the written request of the President, the Treasurer, or any two
Trustees, and if the Secretary, when so requested, refuses or fails for more
than 24 hours to call such meeting, the President, the Treasurer, or such two
Trustees may, in the name of the Secretary, call such meeting by giving due
notice in the manner required when notice is to be given by the Secretary. All
special meetings of the Trustees shall be held at the principal place of
business of the Trust or such other place in the United States as the person or
persons requesting such meeting to be called may designate, but any meeting may
adjourn to any other place.
REGULAR MEETINGS
- ----------------
SECTION 2. Regular meetings of the Trustees may be held without call or
notice at such places and at such times as the Trustees may from time to time
determine, provided that any Trustee who is absent when such determination is
made shall be given notice of the determination.
QUORUM
- ------
SECTION 3. A majority of the Trustees shall constitute a quorum for the
transaction of business.
NOTICE
- ------
SECTION 4. Except as otherwise provided, notice of any special meeting of
the Trustees shall be given by the Secretary to each Trustee orally, by mail,
hand delivery or telegram. A notice may be mailed, postage prepaid, addressed to
him or her at his or her address as registered on the books of the Trust or, if
not so registered, at his or her last known address at least three days before
the meeting or delivered to him or her at least two days before the meeting,
provided orally by telephone at least 24 hours before the meeting or sent to him
or her at least 24 hours before the meeting, by prepaid telegram addressed to
him or her at said registered address, if any, or if he has no such registered
address, at his last known address
SPECIAL ACTION
- --------------
SECTION 5. When all the Trustees shall be present at any meeting, however
called or wherever held, or shall assent to the holding of the meeting without
notice, or after the meeting shall sign a written assent thereto on the record
5
<PAGE>
of such meeting, the acts of such meeting shall be valid as if such meeting had
been regularly held.
ACTION BY CONSENT
- -----------------
SECTION 6. Any action by the Trustees may be taken without a meeting if a
written consent thereto is signed by all the Trustees and filed with the records
of the Trustees' meeting, or by telephone consent provided a quorum of Trustees
participate in any such telephone meeting. Such consent shall be treated as a
vote of the Trustees for all purposes.
ARTICLE V
---------
SHARES OF BENEFICIAL INTEREST
-----------------------------
BENEFICIAL INTEREST
- -------------------
SECTION 1. The beneficial interest in the Trust shall at all times be
divided into an unlimited number of transferable Shares without par value, each
of which shall represent an equal proportionate interest in the series or class
thereof with each other Share of any outstanding series or class thereof. No
Share shall have priority or preference over another Share.
TRANSFER OF SHARES
- ------------------
SECTION 2. The Shares of the Trust shall be transferable, so as to affect
the rights of the Trust, only by transfer recorded on the books of the Trust, in
person or by attorney.
EQUITABLE INTEREST NOT RECOGNIZED
- ---------------------------------
SECTION 3. The Trust shall be entitled to treat the holder of record of
any Share or Shares of beneficial interest as the holder in fact thereof, and
shall not be bound to recognize any equitable or other claim or interest in such
Share or Shares on the part of any other person except as may be otherwise
expressly provided by law.
ARTICLE VI
----------
INSPECTION OF BOOKS
-------------------
The Trustees shall from time to time determine whether and to what extent,
and at what times and places, and under what conditions and regulations the
accounts and books of the Trust or any of them shall be open to the inspection
of the Shareholders; and no Shareholder shall have any right to inspect any
account or book or document of the Trust except as conferred by law or otherwise
by the Trustees or by resolution of the Shareholders.
6
<PAGE>
ARTICLE VII
-----------
FISCAL YEAR
-----------
The fiscal year of the Trust shall end on such date as the Trustees shall
from time to time determine.
ARTICLE VIII
------------
AMENDMENTS
----------
These Bylaws may be amended at any meeting of the Trustees of the Trust by
a vote of the majority of all the Trustees.
ARTICLE IX
----------
PRINCIPAL OFFICE OF THE TRUST
-----------------------------
The principal place of business of the Trust shall be located at 4333 Amon
Carter Boulevard, Fort Worth, Texas 76155, or any other place within or without
the Commonwealth of Massachusetts as the Trustees may determine or as they may
authorize.
7
AMERICAN SELECT FUNDS
MANAGEMENT AGREEMENT
Agreement made as of this _____ day of _______________, 1999 between the
American Select Funds, a Massachusetts business trust (the "Select Trust"), and
AMR Investment Services, Inc. (the "Manager"), a Delaware corporation.
WHEREAS, the Select Trust is registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), as an open-end management investment
company consisting of one or more series (Funds) of shares, each having its own
investment policies; and
WHEREAS, the Manager is an investment adviser under the Investment
Advisers Act of 1940, as amended; and
WHEREAS, the Select Trust desires to retain the Manager as investment
adviser and administrator to furnish administrative, investment advisory and
portfolio management services to the Select Trust with respect to such
portfolios as the Select Trust and the Manager shall agree upon from time to
time (collectively, the "Funds"), and the Manager is willing to furnish such
services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Select Trust hereby appoints the Manager as investment
adviser and administrator of the Select Trust and each Fund listed on Schedule A
of this Agreement (as such schedule may be amended from time to time) for the
period and on the terms set forth in this Agreement. The Manager accepts such
appointment and agrees to render the services herein set forth. In the
performance of its duties, the Manager will act in the best interests of the
Select Trust and each Fund and will comply with (a) applicable laws and
regulations, including, but not limited to, the 1940 Act, (b) the terms of this
Agreement, (c) the Select Trust's Declaration of Trust, By-Laws and currently
effective registration statement under the Securities Act of 1933, as amended,
and the 1940 Act, and any amendments thereto, (d) relevant undertakings to state
securities regulators which have been provided to the Manager, (e) the stated
investment objective, policies and restrictions of each applicable Fund, and (f)
such other guidelines as the Board of Trustees of the Select Trust ("Board of
Trustees") reasonably may establish.
2. DUTIES AS INVESTMENT ADVISER.
-----------------------------
(a) Subject to the supervision of the Board of Trustees, the Manager will
provide a continuous investment program for each Fund, including investment
research and management with respect to all securities, investments and cash
equivalents in each Fund. The Manager will determine from time to time what
securities and other investments will be purchased, retained or sold by each
Fund. The Manager will exercise full discretion and act for each Fund in the
<PAGE>
same manner and with the same force and effect as such Fund itself might or
could do with respect to purchases, sales, or other transactions, as well as
with respect to all other things necessary or incidental to the furtherance or
conduct of such purchases, sales or other transactions.
(b) The Manager will place orders pursuant to its investment
determinations for each Fund either directly with the issuer or through other
broker-dealers ("brokers"). In the selection of brokers and the placement of
orders for the purchase and sale of portfolio investments for the Funds, the
Manager shall use its best efforts to obtain for the Funds the most favorable
price and execution available, except to the extent it may be permitted to pay
higher brokerage commissions for brokerage and research services as described
below. In using its best efforts to obtain the most favorable price and
execution available, the Manager, bearing in mind the Select Trust's best
interests at all times, shall consider all factors it deems relevant, including
by way of illustration, price, the size of the transaction, the nature of the
market for the security, the amount of the commission, the timing of the
transaction taking into account market prices and trends, the reputation,
experience and financial stability of the broker involved and the quality of
service rendered by the broker in other transactions. Subject to such policies
as the Board of Trustees may determine, the Manager shall not be deemed to have
acted unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of its having caused a Fund to pay a broker that
provides brokerage and research services to the Manager an amount of commission
for effecting a portfolio investment transaction in excess of the amount of
commission another broker would have charged for effecting that transaction if
the Manager determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker, viewed in terms of either that particular transaction
or the Manager's overall responsibilities with respect to the Select Trust and
to other clients of the Manager as to which the Manager exercises investment
discretion. The Select Trust agrees that any entity or person associated with
the Manager which is a member of a national securities exchange is authorized to
effect any transaction on such exchange for the account of the Select Trust
which is permitted by Section 11(a) of the Securities Exchange Act of 1934, as
amended, and the Select Trust hereby consents to the retention of compensation
for such transactions.
(c) The Manager will provide the Board of Trustees on a regular basis with
economic and investment analyses and reports and make available to the Board
upon request any economic, statistical and investment services normally
available to institutional or other customers of the Manager.
(d) Any of the foregoing functions with respect to any or all Funds may be
delegated by the Manager, at the Manager's expense, to one or more appropriate
parties, including an affiliated party ("Advisers"), subject to such approval by
2
<PAGE>
the Board of Trustees and shareholders of each affected Fund as may be required
by the 1940 Act. In connection with any such delegation, the Manager shall:
(i) oversee the performance of delegated functions by any Adviser and
furnish the Select Trust with quarterly evaluations and analyses
concerning the performance of delegated responsibilities by those parties;
(ii) allocate the portion of each Fund's assets to be managed by an
Adviser and coordinate the investment activities of the Advisers;
(iii) if appropriate, recommend changes in Advisers or the addition of
Advisers, subject to the necessary approvals under the 1940 Act; and
(iv) be responsible for compensating the Advisers in the manner specified
in its advisory agreements with the Advisers.
3. DUTIES AS ADMINISTRATOR. The Manager will assist in administering the
affairs of the Select Trust subject to the supervision of the Board of Trustees
and the following understandings:
(a) The Manager will supervise all aspects of the operations of the Select
Trust except as hereinafter set forth; provided, however, that nothing herein
contained shall be deemed to relieve or deprive the Board of Trustees of its
responsibility for and control of the conduct of the Select Trust's affairs.
(b) The Manager will investigate and, with appropriate approval of the
Board of Trustees, select necessary service companies to conduct certain
operations of the Select Trust, including the Select Trust's custodian, transfer
agent, dividend disbursing agent, distributor, independent public accountant and
attorney.
(c) The Manager will provide the Select Trust with such administrative and
clerical services as are deemed necessary or advisable by the Board of Trustees,
including the maintenance of certain books and records of the Select Trust and
each Fund which are not maintained by the Select Trust's custodian or any
Adviser.
(d) The Manager will arrange, but not pay, for the periodic updating of
prospectuses and statements of additional information and supplements thereto,
proxy material, tax returns and reports to shareholders and the Securities and
Exchange Commission.
3
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(e) The Manager will provide the Select Trust with, or obtain for it,
adequate office space and all necessary office equipment and services, including
telephone service, heat, utilities, stationery supplies and similar items.
(f) The Manager will hold itself available to respond to shareholder
inquiries.
(g) Any of the foregoing functions with respect to any or all Funds may be
delegated by the Manager, at the Manager's expense, to another appropriate party
(including an affiliated party), subject to such approval by the Board of
Trustees. The Manager shall oversee the performance of delegated functions by
any such party and shall furnish to the Select Trust with quarterly evaluations
and analyses concerning the performance of delegated responsibilities by those
parties.
4. SERVICES NOT EXCLUSIVE. The services furnished by the Manager hereunder
are not to be deemed exclusive and the Manager shall be free to furnish similar
services to others so long as its services under this Agreement are not impaired
thereby.
5. BOOKS AND RECORDS. In compliance with the requirements of Rule 3la-3
under the 1940 Act, the Manager hereby agrees that all records which it
maintains for the Select Trust are the property of the Select Trust and further
agrees to surrender promptly to the Select Trust any of such records upon the
Select Trust's request. The Manager further agrees to preserve for the periods
prescribed by Rule 3la-2 under the 1940 Act the records required to be
maintained by Rule 3la-1 under the 1940 Act.
6. EXPENSES. During the term of this Agreement, the Select Trust will bear
all expenses not specifically assumed by the Manager incurred in its operations
and the offering of its shares. Expenses borne by the Select Trust will include,
but not be limited to, the following (or each Fund's proportionate share of the
following): (a) brokerage commissions relating to securities purchased or sold
by the Select Trust or any losses incurred in connection therewith; (b) fees
payable to and expenses incurred on behalf of the Select Trust by the Manager;
(c) expenses of organizing the Select Trust and the Funds; (d) filing fees and
expenses relating to the registration and qualification of the Select Trust's
shares and the Select Trust under federal or state securities laws and
maintaining such registrations and qualifications; (e) distribution fees, if
any; (f) fees and salaries payable to the members of the Board of Trustees and
officers who are not officers or employees of the Manager or interested persons
(as defined in the 1940 Act) of any investment adviser or distributor of the
Select Trust; (g) taxes (including any income or franchise taxes) and
governmental fees; (h) costs of any liability, uncollectible items of deposit
and other insurance or fidelity bonds; (i) any costs, expenses or losses arising
out of any liability of or claim for damage or other relief asserted against the
Select Trust for violation of any law; (j) legal, accounting and auditing
expenses, including legal fees of special counsel for the independent trustees;
(k) charges of custodians, transfer agents and other agents; (l) costs of
preparing share certificates; (m) expenses of setting in type and printing
4
<PAGE>
Prospectuses and supplements thereto for existing shareholders, reports and
statements to shareholders and proxy material; (n) any extraordinary expenses
(including fees and disbursements of counsel) incurred by the Select Trust; and
(o) fees and other expenses incurred in connection with membership in investment
company organizations.
The Select Trust may pay directly any expense incurred by it in its normal
operations and, if any such payment is consented to by the Manager and
acknowledged as otherwise payable by the Manager pursuant to this Agreement, the
Select Trust may reduce the fee payable to the Manager pursuant to paragraph 7
hereof by such amount. To the extent that such deductions exceed the fee payable
to the Manager on any monthly payment date, such excess shall be carried forward
and deducted in the same manner from the fee payable on succeeding monthly
payment dates.
In addition, if the expenses borne by the Select Trust or any Fund in any
fiscal year exceed the applicable expense limitations imposed by the securities
regulations of any state in which shares are registered or qualified for sale to
the public, the Manager will reimburse the Select Trust or Fund for any excess
up to the amount of the fee payable to it during that fiscal year pursuant to
paragraph 7 hereof.
7. COMPENSATION. For the services provided and the expenses assumed
pursuant to this Agreement with respect to each Fund, the Select Trust will pay
the Manager, effective from the date of this Agreement, a fee which is computed
daily and paid monthly from each Fund's assets at the annual rates as
percentages of that Fund's average daily net assets under Manager's management
as set forth in the attached Schedule A, which schedule can be modified from
time to time to reflect changes in annual rates or the addition or deletion of a
Fund from the terms of this Agreement, subject to appropriate approvals required
by the 1940 Act. To the extent that a Fund invests all of its investable assets
(i.e., securities and cash) in another registered investment company, however,
only that portion of the fee attributable to that Fund as specified in Schedule
A attached hereto shall be paid for the period that such Fund's assets are so
invested. If this Agreement becomes effective or terminates with respect to any
Fund before the end of any month, the fee for the period from the effective date
to the end of the month or from the beginning of such month to the date of
termination, as the case may be, shall be prorated according to the proportion
that such period bears to the full month in which such effectiveness or
termination occurs.
8. LIMITATION OF LIABILITY OF THE MANAGER. The Manager shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Select Trust or any Fund in connection with the matters to which this Agreement
relate except a loss resulting from the willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement. Any person,
even though also an officer, partner, employee, or agent of the Manager, who may
be or become an officer, trustee, employee or agent of the Select Trust shall be
deemed, when rendering services to the Select Trust or acting in any business of
5
<PAGE>
the Select Trust, to be rendering such services to or acting solely for the
Select Trust and not as an officer, partner, employee, or agent or one under the
control or direction of the Manager even though paid by it.
9. DURATION AND TERMINATION. This Agreement shall become effective upon
its execution; provided that, with respect to any Fund now existing or hereafter
created, this agreement shall not take effect unless it first has been approved
by a vote of the majority of those trustees of the Select Trust who are not
parties to this Agreement or interested persons of such party, cast in person at
a meeting called for the purpose of voting on such approval, and by vote of a
majority of that Fund's outstanding voting securities. This Agreement shall
remain in full force and effect continuously thereafter until terminated without
the payment of any penalty by any one of the following:
(a) By vote of a majority of its trustees, or by the affirmative vote of a
majority of the outstanding Shares of such Fund, the Select Trust may at any
time terminate this Agreement with respect to any or all Funds by providing not
more than 60 days' written notice delivered or mailed by registered mail,
postage prepaid, to the Manager at its principal offices.
(b) With respect to any Fund, if (i) the trustees or the shareholders of
that Fund by the affirmative vote of a majority of the outstanding shares of
such Fund, and (ii) a majority of the trustees who are not interested persons of
the Select Trust or of the Manager or of any Adviser, by vote cast in person at
a meeting called for the purpose of voting on such approval, do not specifically
approve at least annually the continuance of this Agreement, then this Agreement
shall automatically terminate at the close of business on the second anniversary
of its execution, or upon the expiration of one year from the effective date of
the last such continuance, whichever is later; provided, however, that if the
continuance of this Agreement is submitted to the shareholders of a Fund for
their approval and such shareholders fail to approve such continuance of this
Agreement as provided herein, the Manager may continue to serve hereunder in a
manner consistent with the 1940 Act and the rules and regulations thereunder
with respect to that Fund.
(c) The Manager may at any time terminate this Agreement with respect to
any or all Funds by not less than 60 days' written notice delivered or mailed by
registered mail, postage prepaid to the Select Trust.
(d) This Agreement automatically and immediately will terminate in the
event of its assignment.
10. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no material amendment of this Agreement
with respect to any Fund shall be effective until approved by vote of the
holders of a majority of that Fund's outstanding voting securities.
6
<PAGE>
11. NAME OF SELECT TRUST. The Select Trust may use the name "American
Select" only for so long as this Agreement or any extension, renewal or
amendment hereof remains in effect, including any similar agreement with any
organization which shall have succeeded to the business of the Manager. At such
time as such an agreement shall no longer be in effect, the Select Trust will
(to the extent that it lawfully can) cease to use any name derived from American
Select Funds, or AMR Investment Services, Inc., or any successor organization.
12. GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Texas, without giving effect to the conflicts of laws
principles thereof, and in accordance with the 1940 Act. To the extent that the
applicable laws of the State of Texas conflict with the applicable provisions of
the 1940 Act, the latter shall control.
13. DEFINITIONS. As used in this Agreement, the terms "majority of the
outstanding voting securities," "interested person," and "assignment" shall have
the same meanings as such terms have in the 1940 Act.
14. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors.
15. NOTICE. Notice hereby is given that the Select Trust's Declaration of
Trust is on file with the Secretary of State of the Commonwealth of
Massachusetts and the Declaration of Trust and this Agreement are executed by
the Select Trust's Trustees and/or officers in their capacities as Trustees
and/or officers, and the obligations of the Declaration of Trust and this
Agreement are not binding upon any of them or the shareholders individually;
rather, they are binding only upon the assets and property of Select Trust.
16. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
Attest: AMERICAN SELECT FUNDS
By: ________________________ By: ______________________________
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Attest: AMR INVESTMENT SERVICES, INC.
By: ________________________ By: ______________________________
8
<PAGE>
SCHEDULE A
TO THE MANAGEMENT AGREEMENT BETWEEN
AMR INVESTMENT SERVICES, INC.
AND THE
AMERICAN SELECT FUNDS
As compensation pursuant to section 7 of the Management Agreement between
AMR Investment Services, Inc. (the "Manager") and American Select Funds (the
"Select Trust"), the Select Trust shall pay to the Manager a fee, computed daily
and paid monthly, at the annual rate of 0.10% of the net assets of the Cash
Reserve Fund, based on the Fund's average daily net assets.
To the extent that a Fund invests all of its investable assets (i.e.,
securities and cash) in another registered investment company, however, the
Select Trust shall not pay the Manager a Management Fee.
DATED: ______________ , 1999
DISTRIBUTION AGREEMENT
This Distribution Agreement is made this ___ day of September, 1999, by
and among American AAdvantage Funds, American AAdvantage Mileage Funds and
American Select Funds, each a Massachusetts business trust (the "Trusts"), SWS
Financial Services, Inc. ("SWS" or the "Distributor"), a _______ corporation,
and AMR Investment Services, Inc. ("AMR"), a Delaware corporation.
WHEREAS, the Trusts are registered as open-end, diversified management
investment companies under the Investment Company Act of 1940, as amended (the
"1940 Act"), and have registered and intend to continue to register their shares
of beneficial interest (the "Shares") for sale to the public under the
Securities Act of 1933, as amended (the "1933 Act"), and various state
securities laws; and
WHEREAS, the Trusts offer for public sale one or more distinct series of
shares of beneficial interest, each corresponding to a distinct portfolio
("Portfolio"); and
WHEREAS, each Trust wishes to retain SWS as the Trust's Distributor in
connection with the offering and sale of the Shares of each current Portfolio
and such other Portfolios as agreed upon between the Trust and SWS from time to
time and to furnish certain other services to the Trust as specified in this
Agreement;
WHEREAS, this Agreement has been approved by a vote of the Board of
Trustees of each Trust in conformity with Paragraph (b)(2) of Rule l2b-1 under
the 1940 Act;
WHEREAS, AMR is the Manager of each Trust; and
WHEREAS, SWS is willing to act as Distributor and to furnish such services
on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT OF SWS. The Trusts hereby appoint SWS as Distributor of
their Shares. As such, SWS agrees to act as agent for the Trusts and, subject to
applicable federal and state laws and the Declaration of Trust, By-Laws and
current Prospectus and Statement of Additional Information of each Trust, (a) to
solicit orders for the purchase of the Shares, subject to such terms and
conditions as each Trust may specify, (b) to hold itself available to receive
orders for the purchase and redemption of the Shares, and to accept such orders
on behalf of each Trust as of the time of receipt of such orders and promptly
transmit such orders as are accepted to the Trust and its transfer agents, and
(c) to make Shares available through the National Securities Clearing
Corporation's FundServ system. Orders shall be deemed effective at the time and
in the manner set forth in the Registration Statement. SWS shall offer the
<PAGE>
Shares of each Portfolio on an agency or "best efforts" basis under which each
Trust shall only issue such Shares as are actually sold. The public offering
price of the Shares of each Portfolio shall be the net asset value per share (as
determined by each Trust) of the outstanding Shares of the Portfolio as set
forth in the Registration Statement. The Trusts reserve the right at any time to
withdraw all offerings of the Shares of any or all Portfolios by notice to SWS.
2. TRUST OBLIGATIONS. Each Trust shall keep SWS fully informed of its
affairs and shall make available to SWS copies of all information, financial
statements and other papers that SWS may reasonably request for use in
connection with the distribution of shares, including, without limitation, such
reasonable number of copies of the most current prospectus, statement of
additional information, and annual and interim reports of a Portfolio as SWS may
request, and each Trust shall cooperate fully in the efforts of SWS to sell and
arrange for the sale of the Shares.
3. SALES TO DEALERS. SWS, with the consent of the Trusts or AMR, may enter
into agreements to sell shares to registered and qualified retail dealers.
4. SALES MATERIALS. SWS shall provide to investors and potential investors
only such information regarding the Trusts as is permitted by applicable law. To
the extent reasonably requested by AMR, SWS will file proposed advertisements
and sales literature with appropriate regulators and consult with AMR regarding
any comments provided by regulators with respect to such materials.
5. COMPENSATION. As compensation for providing services under this
agreement, AMR (and not the Trusts) shall pay to SWS the sum of (a) $50,000
annually, payable monthly in arrears, (b) the ongoing licensing fees and
incidental costs of those employees of AMR who are designated by AMR to become
registered representatives of SWS, (c) the compensation paid by SWS to such
registered representatives in accordance with compensation schedules, as agreed
upon by SWS and AMR from time to time; (d) the reasonable fees associated with
listing and maintaining shares on the National Securities Clearing Corporation's
FundServ system, as agreed upon by SWS and AMR; and (e) incidental expenses
associated with printing and distributing advertising and sales literature.
6. TRUST EXPENSES. Each Trust agrees, at its own expense, to register
Shares with the Securities and Exchange Commission ("SEC"), state and other
regulatory bodies, and to prepare and file from time to time such registration
statements, amendments, reports and other documents as may be necessary to offer
and sell Shares. Each Portfolio shall bear all expenses related to preparing and
typesetting Prospectuses, Statements of Additional Information and other
materials required by law and such other expenses, including printing and
mailing expenses, related to the Portfolio's communications with persons who are
shareholders of that Portfolio. Except as specifically provided in this
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<PAGE>
Agreement, the Trusts and the Portfolios shall bear none of the expenses of SWS
in connection with its offer and sale of the Shares.
7. INDEMNIFICATION BY THE TRUSTS AND AMR. The Trusts and AMR will
indemnify, defend and hold harmless SWS, its officers and directors, and any
person who controls SWS within the meaning of Section 15 of the 1933 Act
(collectively, "SWS Indemnified Persons") from and against any and all claims,
demands, liabilities and expenses (including the reasonable cost of
investigating or defending such claims, demands or liabilities) that any SWS
Indemnified Person may incur under the 1933 Act, common law or otherwise arising
out of or based upon any (a) untrue statement of a material fact in the
Registration Statement, (b) omission to state a material fact in the
Registration Statement, or (c) failure by the Trusts or AMR to comply with the
terms of this Agreement, provided that this Agreement shall not protect any SWS
Indemnified Person from liability to which such person otherwise would be
subject by reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties, or by reason of its reckless disregard of its duties
under this Agreement.
8. INDEMNIFICATION BY SWS. SWS will indemnify, defend and hold harmless
the Trusts and their Portfolios, AMR, their several officers, directors and
Trustees, and any person who controls the Trusts or AMR within the meaning of
Section 15 of the 1933 Act (collectively, "AMR Indemnified Persons") from and
against any and all claims, demands, liabilities and expenses (including the
reasonable cost of investigating or defending such claims, demands or
liabilities) that any AMR Indemnified Person may incur under the 1933 Act,
common law or otherwise arising out of or based upon any (a) untrue statement of
a material fact furnished by a SWS Indemnified Person for use in the
Registration Statement, (b) failure by such a person to state a material fact
therein as necessary to make the statements therein not misleading, or (c)
failure by SWS to comply with the terms of this Agreement or applicable law,
provided that this Agreement shall not protect any AMR Indemnified Person from
liability to which such person otherwise would be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of its duties, or
by reason of its reckless disregard of its obligations and duties under this
Agreement.
9. SHARE CERTIFICATES. The Trusts shall not issue certificates
representing Shares unless requested to do so by a shareholder. If such request
is transmitted through SWS, the Trusts will cause certificates evidencing the
Shares owned to be issued in such names and denominations as SWS shall from time
to time direct.
10. STATUS OF SWS. SWS is an independent contractor and shall be agent for
the Trusts only with respect to the sale and redemption of Shares.
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<PAGE>
11. NON-EXCLUSIVE SERVICES. The services of SWS to the Trusts under this
Agreement are not to be deemed exclusive, and SWS shall be free to render
similar services or other services to others so long as its services hereunder
are not impaired thereby.
12. REPORTS BY SWS. SWS shall prepare reports for the Trustees regarding
its activities under this Agreement as from time to time shall be reasonably
requested by the Trustees.
13. DEFINITIONS. As used herein: the term "Registration Statement" shall
mean the registration statement filed by the Trusts with the SEC and effective
under the 1933 Act, as such Registration Statement is amended or supplemented
from time to time; the terms "Prospectus" and "Statement of Additional
Information" shall mean the current form of prospectus(es) and statement(s) of
additional information filed by the Trusts as part of the Registration
Statement; the term "net asset value" shall have the meaning ascribed to it in
each Trust's Declaration of Trust; the term "Trustees" shall refer to the Board
of Trustees of each Trust; and the terms "affiliated person," "assignment,"
"interested person," and "majority of the outstanding voting securities" shall
have the meanings given to them by Section 2(a) of the 1940 Act, subject to such
exemptions as may be granted by the SEC by any rule, regulation or order.
14. EFFECTIVENESS OF AGREEMENT. This Agreement shall become effective upon
the date hereinabove written, provided that, with respect to a Portfolio, this
Agreement shall not take effect unless such action has first been approved by
vote of a majority of the Trustees of each Trust and by vote of a majority of
those Trustees who are not interested persons of the Trusts or SWS (all such
Trustees collectively being referred to herein as the "Independent Trustees"),
cast in person at a meeting called for the purpose of voting on such action.
15. TERMINATION OF AGREEMENT. Unless sooner terminated as provided herein,
this Agreement shall continue in effect for one year from the above written
date. Thereafter, if not terminated, this Agreement shall continue automatically
for successive periods of twelve months each, provided that such continuance is
approved at least annually (a) by a vote of a majority of the Independent
Trustees, cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the Board of Trustees of each Trust or, with respect to any
given series, by vote of a majority of the outstanding voting securities of such
Portfolio. Notwithstanding the foregoing, with respect to any Portfolio, this
Agreement may be terminated at any time, without the payment of any penalty, by
vote of the Board of Trustees of a Trust, by vote of a majority of the
Independent Trustees of a Trust or by vote of a majority of the outstanding
voting securities of such Portfolio on 180 days' written notice to SWS or by SWS
at any time, without the payment of any penalty, on 180 days' written notice to
the Trust or such Portfolio. Termination of this Agreement with respect to any
given Portfolio shall not affect the continued validity of this Agreement or the
performance thereunder with respect to any other Portfolio. This Agreement
automatically will terminate in the event of its assignment.
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<PAGE>
16. AMENDMENTS. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought.
17. GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Texas, without giving effect to the conflicts of laws
principles thereof, and the 1940 Act. To the extent that the applicable laws of
the State of Texas conflict with the applicable provisions of the 1940 Act,
however, the 1940 Act shall control.
18. REPRESENTATIONS. SWS represents and warrants that it (a) is duly
authorized to enter into this Agreement, (b) is duly registered and licensed as
a broker-dealer and in good standing with the National Association of Securities
Dealers, Inc. and all applicable state securities regulators and that it is duly
authorized and qualified to perform the services set forth in this Agreement,
and (c) promptly will notify AMR and each Trust if SWS or any of its affiliated
persons become subject to a legal proceeding which, if adversely decided, could
impair SWS's ability to satisfy its obligations under this Agreement.
19. NOTICE. Any notice required or permitted to be given by either party
to the other shall be deemed sufficient upon receipt in writing at the other
party's principal offices.
20. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
21. MASSACHUSETTS BUSINESS TRUST. The Trusts are Massachusetts business
trusts. A copy of each Trust's Declaration of Trust of the Trust is on file with
the Secretary of the Commonwealth of Massachusetts. This Agreement is not
binding upon any of the Trustees, officers or shareholders of the Trusts
individually, and no such person shall be individually liable with respect to
any action or inaction resulting from this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers thereunto duly authorized.
Attest: AMERICAN AADVANTAGE FUNDS
By: By:
---------------------------- ----------------------------
Title:
--------------------------
Attest: AMERICAN AADVANTAGE MILEAGE FUNDS
By: By:
---------------------------- ----------------------------
Title:
--------------------------
Attest: AMERICAN SELECT FUNDS
By: By:
---------------------------- ----------------------------
Title:
--------------------------
Attest: SWS FINANCIAL SERVICES, INC.
By: By:
---------------------------- ----------------------------
Title:
--------------------------
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<PAGE>
Attest: AMR INVESTMENT SERVICES, INC.
By: By:
---------------------------- ----------------------------
Title:
--------------------------
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CUSTODIAN AGREEMENT
This Agreement between AMERICAN SELECT FUNDS, a business trust organized
and existing under the laws of Massachusetts with its principal place of
business at 4333 Amon Carter Boulevard, Fort Worth, Texas 76155(the "TRUST"),
and STATE STREET BANK and TRUST COMPANY, a Massachusetts trust company with its
principal place of business at 225 Franklin Street, Boston, Massachusetts 02110
(the "CUSTODIAN"),
WITNESSETH:
WHEREAS, the Trust intends to offer shares in the series set forth on
Schedule D hereto (such series, together with all other series subsequently
established by the Trust and made subject to this Agreement in accordance with
Section 20 and as of the effective date set forth on Schedule D, shall be
referred to herein as the "PORTFOLIO(S)"); and
WHEREAS, each Portfolio intends to invest all of its investable assets
in the portfolio of AMR INVESTMENT SERVICES TRUST, an open-end, diversified
management investment company, with which it shares its investment objectives,
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
SECTION 1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Trust hereby employs the Custodian as the custodian of the assets of
the Portfolios of the Trust, including securities which the Trust, on behalf of
the applicable Portfolio desires to be held in places within the United States
("DOMESTIC SECURITIES") and securities it desires to be held outside the United
States ("FOREIGN SECURITIES") pursuant to the provisions of the Trust's
Declaration of Trust. The Trust on behalf of the Portfolio(s) agrees to deliver
to the Custodian all securities and cash of the Portfolios, and all payments of
income, payments of principal or capital distributions received by it with
respect to all securities owned by the Portfolio(s) from time to time, and the
cash consideration received by it for such new or treasury shares of each class
of beneficial interest of the Trust representing interests in the Portfolios
("SHARES") as may be issued or sold from time to time. The Custodian shall not
be responsible for any property of a Portfolio held or received by the Portfolio
and not delivered to the Custodian. Upon receipt of "PROPER INSTRUCTIONS" (as
such term is defined in Section 6 hereof), the Custodian shall on behalf of the
applicable Portfolio(s) from time to time employ one or more sub-custodians,
located in the United States but only in accordance with an applicable vote by
the Board of Trustees of the Trust (the "BOARD OF TRUSTEES") on behalf of the
applicable Portfolio(s), and provided that the Custodian shall have no more or
less responsibility or liability to the Trust on account of any actions or
omissions of any sub-custodian so employed than any such sub-custodian has to
the Custodian. The Custodian may employ as sub-custodian for the Trust's foreign
<PAGE>
securities on behalf of the applicable Portfolio(s) the foreign banking
institutions and foreign securities depositories designated in Schedules A and B
hereto but only in accordance with the applicable provisions of Sections 3 and
4.
SECTION 2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE TRUST
HELD BY THE CUSTODIAN IN THE UNITED STATES
SECTION 2.1 HOLDING SECURITIES. The Custodian shall hold and physically
segregate for the account of each Portfolio all non-cash property, to be held by
it in the United States including all domestic securities owned by such
Portfolio, other than (a) securities which are maintained pursuant to Section
2.9 in a clearing agency which acts as a securities depository or in a
book-entry system authorized by the U.S. Department of the Treasury (each, a
"U.S. SECURITIES SYSTEM") and (b) commercial paper of an issuer for which State
Street Bank and Trust Company acts as issuing and paying agent ("DIRECT PAPER")
which is deposited and/or maintained in the Direct Paper System of the Custodian
(the "DIRECT PAPER SYSTEM") pursuant to Section 2.10.
SECTION 2.2 DELIVERY OF SECURITIES. The Custodian shall release and
deliver domestic securities owned by a Portfolio held by the Custodian or in a
U.S. Securities System account of the Custodian or in the Custodian's Direct
Paper book entry system account ("DIRECT PAPER SYSTEM ACCOUNT") only upon
receipt of Proper Instructions from the Trust on behalf of the applicable
Portfolio, which may be continuing instructions when deemed appropriate by the
parties, and only in the following cases:
1) Upon sale of such securities for the account of the Portfolio and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to suc securities entered into by the
Portfolio;
3) In the case of a sale effected through a U.S. Securities System,
in accordance with the provisions of Section 2.9 hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided
that, in any such case, the cash or other consideration is to be
delivered to the Custodian;
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6) To the issuer thereof, or its agent, for transfer into the name
of the Portfolio or into the name of any nominee or nominees of
the Custodian or into the name or nominee name of any agent
appointed pursuant to Section 2.8 or into the name or nominee
name of any sub-custodian appointed pursuant to Section 1; or for
exchange for a different number of bonds, certificates or other
evidence representing the same aggregate face amount or number of
units; provided that, in any such case, the new securities are to
be delivered to the Custodian;
7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street delivery"
custom; provided that in any such case, the Custodian shall have
no responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for such
securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment
of the securities of the issuer of such securities, or pursuant
to provisions for conversion contained in such securities, or
pursuant to any deposit agreement; provided that, in any such
case, the new securities and cash, if any, are to be delivered to
the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that, in
any such case, the new securities and cash, if any, are to be
delivered to the Custodian;
10) For delivery in connection with any loans of securities made by
the Portfolio, but only against receipt of adequate collateral as
agreed upon from time to time by the Custodian and the Trust on
behalf of the Portfolio, which may be in the form of cash or
obligations issued by the United States government, its agencies
or instrumentalities, except that in connection with any loans
for which collateral is to be credited to the Custodian's account
in the book-entry system authorized by the U.S. Department of the
Treasury, the Custodian will not be held liable or responsible
for the delivery of securities owned by the Portfolio prior to
the receipt of such collateral;
11) For delivery as security in connection with any borrowing by the
Trust on behalf of the Portfolio requiring a pledge of assets by
the Trust on behalf of the Portfolio, but only against receipt of
amounts borrowed;
12) For delivery in accordance with the provisions of any agreement
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DRAFT -- FOR DISCUSSION PURPOSES ONLY
among the Trust on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Securities Exchange Act of
1934 (the "EXCHANGE ACT") and a member of The National
Association of Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing Corporation and
of any registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Portfolio of
the Trust;
13) For delivery in accordance with the provisions of any agreement
among the Trust on behalf of the Portfolio, the Custodian, and a
Futures Commission Merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any Contract Market,
or any similar organization or organizations, regarding account
deposits in connection with transactions by the Portfolio of the
Trust;
14) Upon receipt of instructions from the transfer agent for the
Trust (the "TRANSFER AGENT") for delivery to such Transfer Agent
or to the holders of Shares in connection with distributions in
kind, as may be described from time to time in the currently
effective prospectus and statement of additional information of
the Trust related to the Portfolio (the "PROSPECTUS"), in
satisfaction of requests by holders of Shares for repurchase or
redemption; and
15) For any other proper trust purpose, but only upon receipt of
written Proper Instructions specifying the securities of the
Portfolio to be delivered, setting forth the purpose for which
such delivery is to be made, declaring such purpose to be a
proper trust purpose, and naming the person or persons to whom
delivery of such securities shall be made.
SECTION 2.3 REGISTRATION OF SECURITIES. Domestic securities held by the
Custodian (other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Trust on behalf of the Portfolio
or of any nominee of the Custodian which nominee shall be assigned exclusively
to the Portfolio, unless the Trust has authorized in writing the appointment of
a nominee to be used in common with other registered investment companies having
the same investment adviser as the Portfolio, or in the name or nominee name of
any agent appointed pursuant to Section 2.8 or in the name or nominee name of
any sub-custodian appointed pursuant to Section 1. All securities accepted by
the Custodian on behalf of the Portfolio under the terms of this Agreement shall
be in "street name" or other good delivery form. If, however, the Trust directs
the Custodian to maintain securities in "street name", the Custodian shall
utilize its best efforts only to timely collect income due the Trust on such
securities and to notify the Trust on a best efforts basis only of relevant
corporate actions including, without limitation, pendency of calls, maturities,
tender or exchange offers.
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SECTION 2.4 BANK ACCOUNTS. The Custodian shall open and maintain a
separate bank account or accounts in the United States in the name of each
Portfolio of the Trust, subject only to draft or order by the Custodian acting
pursuant to the terms of this Agreement, and shall hold in such account or
accounts, subject to the provisions hereof, all cash received by it from or for
the account of the Portfolio, other than cash maintained by the Portfolio in a
bank account established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940, as amended (the "1940 Act"). Trusts held by the
Custodian for a Portfolio may be deposited by it to its credit as Custodian in
the Banking Department of the Custodian or in such other banks or trust
companies as it may in its discretion deem necessary or desirable; provided,
however, that every such bank or trust company shall be qualified to act as a
custodian under the 1940 Act and that each such bank or trust company and the
funds to be deposited with each such bank or trust company shall on behalf of
each applicable Portfolio be approved by vote of a majority of the Board of
Trustees. Such funds shall be deposited by the Custodian in its capacity as
Custodian and shall be withdrawable by the Custodian only in that capacity.
SECTION 2.5 AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between
the Trust, on behalf of each applicable Portfolio, and the Custodian, the
Custodian shall, upon the receipt of Proper Instructions from the Trust, make
federal funds available to such Portfolio as of specified times agreed upon from
time to time by the Trust and the Custodian in the amount of checks received in
payment for Shares of such Portfolio which are deposited into the Portfolio's
account.
SECTION 2.6 COLLECTION OF INCOME. Subject to the provisions of Section
2.3, the Custodian shall collect on a timely basis all income and other payments
with respect to registered domestic securities held hereunder to which each
Portfolio shall be entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all income and other
payments with respect to bearer domestic securities if, on the date of payment
by the issuer, such securities are held by the Custodian or its agent thereof
and shall credit such income, as collected, to such Portfolio's custodian
account. Without limiting the generality of the foregoing, the Custodian shall
detach and present for payment all coupons and other income items requiring
presentation as and when they become due and shall collect interest when due on
securities held hereunder. Income due each Portfolio on securities loaned
pursuant to the provisions of Section 2.2 (10) shall be the responsibility of
the Trust. The Custodian will have no duty or responsibility in connection
therewith, other than to provide the Trust with such information or data as may
be necessary to assist the Trust in arranging for the timely delivery to the
Custodian of the income to which the Portfolio is properly entitled.
SECTION 2.7 PAYMENT OF TRUST MONIES. Upon receipt of Proper Instructions
from the Trust on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, the Custodian shall pay out
monies of a Portfolio in the following cases only:
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1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of the
Portfolio but only (a) against the delivery of such securities or
evidence of title to such options, futures contracts or options
on futures contracts to the Custodian (or any bank, banking firm
or trust company doing business in the United States or abroad
which is qualified under the 1940 Act to act as a custodian and
has been designated by the Custodian as its agent for this
purpose) registered in the name of the Portfolio or in the name
of a nominee of the Custodian referred to in Section 2.3 hereof
or in proper form for transfer; (b) in the case of a purchase
effected through a U.S. Securities System, in accordance with the
conditions set forth in Section 2.9 hereof; (c) in the case of a
purchase involving the Direct Paper System, in accordance with
the conditions set forth in Section 2.10; (d) in the case of
repurchase agreements entered into between the Trust on behalf of
the Portfolio and the Custodian, or another bank, or a
broker-dealer which is a member of NASD, (i) against delivery of
the securities either in certificate form or through an entry
crediting the Custodian's account at the Federal Reserve Bank
with such securities or (ii) against delivery of the receipt
evidencing purchase by the Portfolio of securities owned by the
Custodian along with written evidence of the agreement by the
Custodian to repurchase such securities from the Portfolio or (e)
for transfer to a time deposit account of the Trust in any bank,
whether domestic or foreign; such transfer may be effected prior
to receipt of a confirmation from a broker and/or the applicable
bank pursuant to Proper Instructions from the Trust as defined
herein;
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Shares issued as set forth in
Section 5 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments
for the account of the Portfolio: interest, taxes, management,
accounting, transfer agent and legal fees, and operating expenses
of the Trust whether or not such expenses are to be in whole or
part capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares declared pursuant to
the governing documents of the Trust;
6) For payment of the amount of dividends received in respect
of securities sold short;
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7) For any other proper trust purpose, but only upon receipt of
written Proper Instructions specifying the amount of such
payment, setting forth the purpose for which such payment is to
be made, declaring such purpose to be a proper trust purpose, and
naming the person or persons to whom such payment is to be made.
SECTION 2.8 APPOINTMENT OF AGENTS. The Custodian may at any time or
times in its discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified under the 1940 Act to act as a
custodian, as its agent to carry out such of the provisions of this Section 2 as
the Custodian may from time to time direct; provided, however, that the
appointment of any agent shall not relieve the Custodian of its responsibilities
or liabilities hereunder.
SECTION 2.9 DEPOSIT OF TRUST ASSETS IN U.S. SECURITIES SYSTEMS. The
Custodian may deposit and/or maintain securities owned by a Portfolio in a
clearing agency registered with the United States Securities and Exchange
Commission (the "SEC") under Section 17A of the Exchange Act , which acts as a
securities depository, or in the book-entry system authorized by the U.S.
Department of the Treasury and certain federal agencies, collectively referred
to herein as "U.S. SECURITIES SYSTEM" in accordance with applicable Federal
Reserve Board and SEC rules and regulations, if any, and subject to the
following provisions:
1) The Custodian may keep securities of the Portfolio in a U.S.
Securities System provided that such securities are represented
in an account of the Custodian in the U.S. Securities System (the
"U.S. SECURITIES SYSTEM ACCOUNT") which account shall not include
any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a U.S. Securities System shall
identify by book-entry those securities belonging to the
Portfolio;
3) The Custodian shall pay for securities purchased for the account
of the Portfolio upon (i) receipt of advice from the U.S.
Securities System that such securities have been transferred to
the U.S. Securities System Account, and (ii) the making of an
entry on the records of the Custodian to reflect such payment and
transfer for the account of the Portfolio. The Custodian shall
transfer securities sold for the account of the Portfolio upon
(i) receipt of advice from the U.S. Securities System that
payment for such securities has been transferred to the U.S.
Securities System Account, and (ii) the making of an entry on the
records of the Custodian to reflect such transfer and payment for
the account of the Portfolio. Copies of all advices from the U.S.
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Securities System of transfers of securities for the account of
the Portfolio shall identify the Portfolio, be maintained for the
Portfolio by the Custodian and be provided to the Trust at its
request. Upon request, the Custodian shall furnish the Trust on
behalf of the Portfolio confirmation of each transfer to or from
the account of the Portfolio in the form of a written advice or
notice and shall furnish to the Trust on behalf of the Portfolio
copies of daily transaction sheets reflecting each day's
transactions in the U.S. Securities System for the account of the
Portfolio;
4) The Custodian shall provide the Trust for the Portfolio with any
report obtained by the Custodian on the U.S. Securities System's
accounting system, internal accounting control and procedures for
safeguarding securities deposited in the U.S. Securities System;
5) The Custodian shall have received from the Trust on behalf of the
Portfolio the initial or annual certificate, as the case may be,
required by Section 15 hereof;
6) Anything to the contrary in this Agreement notwithstanding, the
Custodian shall be liable to the Trust for the benefit of the
Portfolio for any loss or damage to the Portfolio resulting from
use of the U.S. Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its agents
or of any of its or their employees or from failure of the
Custodian or any such agent to enforce effectively such rights as
it may have against the U.S. Securities System; at the election
of the Trust, it shall be entitled to be subrogated to the rights
of the Custodian with respect to any claim against the U.S.
Securities System or any other person which the Custodian may
have as a consequence of any such loss or damage if and to the
extent that the Portfolio has not been made whole for any such
loss or damage; the Custodian agrees to provide reasonable
cooperation in connection with such subrogation.
SECTION 2.10 TRUST ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM.
The Custodian may deposit and/or maintain securities owned by a Portfolio in the
Direct Paper System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper System
will be effected in the absence of Proper Instructions from the
Trust on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the Direct
Paper System only if such securities are represented in the
Direct Paper System Account, which account shall not include any
assets of the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
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3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the
Portfolio;
4) The Custodian shall pay for securities purchased for the account
of the Portfolio upon the making of an entry on the records of
the Custodian to reflect such payment and transfer of securities
to the account of the Portfolio. The Custodian shall transfer
securities sold for the account of the Portfolio upon the making
of an entry on the records of the Custodian to reflect such
transfer and receipt of payment for the account of the Portfolio;
5) The Custodian shall furnish the Trust on behalf of the Portfolio
confirmation of each transfer to or from the account of the
Portfolio, in the form of a written advice or notice, of Direct
Paper on the next business day following such transfer and shall
furnish to the Trust on behalf of the Portfolio copies of daily
transaction sheets reflecting each day's transaction in the
Direct Paper System for the account of the Portfolio;
6) The Custodian shall provide the Trust on behalf of the Portfolio
with any report on its system of internal accounting control as
the Trust may reasonably request from time to time.
SECTION 2.11 SEGREGATED ACCOUNT. The Custodian shall upon receipt of
Proper Instructions from the Trust on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for and on behalf of
each such Portfolio, into which account or accounts may be transferred cash
and/or securities, including securities maintained in an account by the
Custodian pursuant to Section 2.9 hereof, (i) in accordance with the provisions
of any agreement among the Trust on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Exchange Act and a member of the NASD (or any
futures commission merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing Corporation and of
any registered national securities exchange (or the Commodity Futures Trading
Commission or any registered contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in connection with
transactions by the Portfolio, (ii) for purposes of segregating cash or
government securities in connection with options purchased, sold or written by
the Portfolio or commodity futures contracts or options thereon purchased or
sold by the Portfolio, (iii) for the purposes of compliance by the Portfolio
with the procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the SEC relating to the maintenance of
segregated accounts by registered investment companies and (iv) for other proper
trust purposes, but only, in the case of clause (iv), upon receipt of written
Proper Instructions from the Trust on behalf of the applicable Portfolio setting
forth the purpose or purposes of such segregated account and declaring such
purpose(s) to be a proper trust purpose.
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SECTION 2.12 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian
shall execute ownership and other certificates and affidavits for all federal
and state tax purposes in connection with receipt of income or other payments
with respect to domestic securities of each Portfolio held by it and in
connection with transfers of securities.
SECTION 2.13 PROXIES. The Custodian shall, with respect to the domestic
securities held hereunder, cause to be promptly executed by the registered
holder of such securities, if the securities are registered otherwise than in
the name of the Portfolio or a nominee of the Portfolio, all proxies, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Portfolio such proxies, all proxy soliciting materials
and all notices relating to such securities.
SECTION 2.14 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. Subject to
the provisions of Section 2.3, the Custodian shall transmit promptly to the
Trust for each Portfolio all written information (including, without limitation,
pendency of calls and maturities of domestic securities and expirations of
rights in connection therewith and notices of exercise of call and put options
written by the Trust on behalf of the Portfolio and the maturity of futures
contracts purchased or sold by the Portfolio) received by the Custodian from
issuers of the securities being held for the Portfolio. With respect to tender
or exchange offers, the Custodian shall transmit promptly to the Portfolio all
written information received by the Custodian from issuers of the securities
whose tender or exchange is sought and from the party (or his agents) making the
tender or exchange offer. If the Portfolio desires to take action with respect
to any tender offer, exchange offer or any other similar transaction, the
Portfolio shall notify the Custodian at least three business days prior to the
date on which the Custodian is to take such action.
SECTION 3. THE CUSTODIAN AS FOREIGN CUSTODY MANAGER OF THE PORTFOLIOS
SECTION 3.1 DEFINITIONS. The following capitalized terms shall have
the indicated meanings:
"COUNTRY RISK" means all factors reasonably related to the systemic risk of
holding Foreign Assets in a particular country including, but not limited to,
such country's political environment; economic and financial infrastructure
(including any Mandatory Securities Depositories operating in the country);
prevailing or developing custody and settlement practices; and laws and
regulations applicable to the safekeeping and recovery of Foreign Assets held in
custody in that country.
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"ELIGIBLE FOREIGN CUSTODIAN" has the meaning set forth in section (a)(1) of Rule
17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as
defined in Rule 17f-5), a bank holding company meeting the requirements of an
Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate
action of the SEC, or a foreign branch of a Bank (as defined in Section 2(a)(5)
of the 1940 Act) meeting the requirements of a custodian under Section 17(f) of
the 1940 Act, except that the term does not include Mandatory Securities
Depositories. "FOREIGN ASSETS" means any of the Portfolios' investments
(including foreign currencies) for which the primary market is outside the
United States and such cash and cash equivalents as are reasonably necessary to
effect the Portfolios' transactions in such investments.
"FOREIGN CUSTODY MANAGER" has the meaning set forth in section (a)(2)of Rule
17f-5.
"MANDATORY SECURITIES DEPOSITORY" means a foreign securities depository or
clearing agency that, either as a legal or practical matter, must be used if the
Trust, on the Portfolios' behalf, determines to place Foreign Assets in a
country outside the United States (i) because required by law or regulation;
(ii) because securities cannot be withdrawn from such foreign securities
depository or clearing agency; or (iii) because maintaining or effecting trades
in securities outside the foreign securities depository or clearing agency is
not consistent with prevailing or developing custodial or market practices.
SECTION 3.2 DELEGATION TO THE CUSTODIAN AS FOREIGN CUSTODY MANAGER. The
Trust, by resolution adopted by the Board of Trustees, hereby delegates to the
Custodian with respect to the Portfolios, subject to Section (b) of Rule 17f-5,
the responsibilities as Foreign Custody Manager set forth in this Section 3 with
respect to Foreign Assets of the Portfolios held outside the United States, and
the Custodian hereby accepts such delegation, as the Portfolios' Foreign Custody
Manager.
SECTION 3.3 COUNTRIES COVERED. The Foreign Custody Manager shall be
responsible for performing the delegated responsibilities defined below only
with respect to the countries and custody arrangements for each such country
listed on Schedule A of this Contract, which list of countries may be amended
from time to time by the Trust with the agreement of the Custodian. The Foreign
Custody Manager shall list on Schedule A the Eligible Foreign Custodians
selected by the Foreign Custody Manager to maintain the assets of the
Portfolios, which list of Eligible Foreign Custodians may be amended from time
to time in the sole discretion of the Foreign Custody Manager. Mandatory
Securities Depositories are listed on Schedule B to this Agreement, which may be
amended from time to time by the Foreign Custody Manager. The Foreign Custody
Manager will provide amended versions of Schedules A and B in accordance with
Section 3.7 hereof.
Upon the receipt by the Foreign Custody Manager of Proper Instructions
to open an account or to place or maintain Foreign Assets in a country listed on
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Schedule A, and the fulfillment by the Trust on behalf of the Portfolios of the
applicable account opening requirements for the country, the Foreign Custody
Manager shall be deemed to have been delegated by the Board of Trustees on
behalf of the Portfolios responsibility as Foreign Custody Manager with respect
to that country and to have accepted such delegation. Following the receipt of
Proper Instructions directing the Foreign Custody Manager to close the account
of a Portfolio with the Eligible Foreign Custodian selected by the Foreign
Custody Manager in a designated country, the delegation by the Board of Trustees
on behalf of the Portfolios to the Custodian as Foreign Custody Manager for that
country shall be deemed to have been withdrawn and the Custodian shall
immediately cease to be the Foreign Custody Manager of the Portfolios with
respect to that country.
The Foreign Custody Manager may withdraw its acceptance of delegated
responsibilities with respect to a designated country upon written notice to the
Trust. Thirty days (or such longer period as to which the parties agree in
writing) after receipt of any such notice by the Trust, the Custodian shall have
no further responsibility as Foreign Custody Manager to the Trust with respect
to the country as to which the Custodian's acceptance of delegation is
withdrawn.
SECTION 3.4 SCOPE OF DELEGATED RESPONSIBILITIES.
3.4.1 Selection of Eligible Foreign Custodians. Subject to the
provisions of this Section 3, the Portfolios' Foreign Custody Manager may place
and maintain the Foreign Assets in the care of the Eligible Foreign Custodian
selected by the Foreign Custody Manager in each country listed on Schedule A, as
amended from time to time.
In performing its delegated responsibilities as Foreign Custody Manager
to place or maintain Foreign Assets with an Eligible Foreign Custodian, the
Foreign Custody Manager shall determine that the Foreign Assets will be subject
to reasonable care, based on the standards applicable to custodians in the
country in which the Foreign Assets will be held by that Eligible Foreign
Custodian, after considering all factors relevant to the safekeeping of such
assets, including, without limitation, the factors specified in Rule
17f-5(c)(1).
3.4.2 Contracts With Eligible Foreign Custodians. The Foreign Custody
Manager shall determine that the contract (or the rules or established practices
or procedures in the case of an Eligible Foreign Custodian that is a foreign
securities depository or clearing agency) governing the foreign custody
arrangements with each Eligible Foreign Custodian selected by the Foreign
Custody Manager will satisfy the requirements of Rule 17f-5(c)(2).
3.4.3 Monitoring. In each case in which the Foreign Custody Manager
maintains Foreign Assets with an Eligible Foreign Custodian selected by the
Foreign Custody Manager, the Foreign Custody Manager shall establish a system to
monitor (i) the appropriateness of maintaining the Foreign Assets with such
Eligible Foreign Custodian and (ii) the contract governing the custody
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arrangements established by the Foreign Custody Manager with the Eligible
Foreign Custodian (or the rules or established practices and procedures in the
case of an Eligible Foreign Custodian selected by the Foreign Custody Manager
which is a foreign securities depository or clearing agency that is not a
Mandatory Securities Depository). In the event the Foreign Custody Manager
determines that the custody arrangements with an Eligible Foreign Custodian it
has selected are no longer appropriate, the Foreign Custody Manager shall notify
the Board of Trustees in accordance with Section 3.7 hereunder.
SECTION 3.5 GUIDELINES FOR THE EXERCISE OF DELEGATED AUTHORITY. For
purposes of this Section 3, the Board of Trustees shall be deemed to have
considered and determined to accept such Country Risk as is incurred by placing
and maintaining the Foreign Assets in each country for which the Custodian is
serving as Foreign Custody Manager of the Portfolios. The Trust, on behalf of
the Portfolios, and the Custodian each expressly acknowledge that the Foreign
Custody Manager shall not be delegated any responsibilities under this Section 3
with respect to Mandatory Securities Depositories.
SECTION 3.6 STANDARD OF CARE AS FOREIGN CUSTODY MANAGER OF THE
PORTFOLIOS. In performing the responsibilities delegated to it, the Foreign
Custody Manager agrees to exercise reasonable care, prudence and diligence such
as a person having responsibility for the safekeeping of assets of management
investment companies registered under the 1940 Act would exercise.
SECTION 3.7 REPORTING REQUIREMENTS. The Foreign Custody Manager shall
report the withdrawal of the Foreign Assets from an Eligible Foreign Custodian
and the placement of such Foreign Assets with another Eligible Foreign Custodian
by providing to the Board of Trustees amended Schedules A or B at the end of the
calendar quarter in which an amendment to either Schedule has occurred. The
Foreign Custody Manager shall make written reports notifying the Board of
Trustees of any other material change in the foreign custody arrangements of the
Portfolios described in this Article 3 after the occurrence of the material
change.
SECTION 3.8 REPRESENTATIONS WITH RESPECT TO RULE 17f-5. The Foreign
Custody Manager represents to the Trust that it is a U.S. Bank as defined in
section (a)(7) of Rule 17f-5. The Trust represents to the Custodian that the
Board of Trustees has determined that it is reasonable for the Board of Trustees
to rely on the Custodian to perform the responsibilities delegated pursuant to
this Agreement to the Custodian as the Foreign Custody Manager of the
Portfolios.
SECTION 3.9 EFFECTIVE DATE AND TERMINATION OF THE CUSTODIAN AS FOREIGN
CUSTODY MANAGER. The Board of Trustees' delegation to the Custodian as Foreign
Custody Manager of the Portfolios shall be effective as of the date of execution
of this Agreement and shall remain in effect until terminated at any time,
without penalty, by written notice from the terminating party to the
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non-terminating party. Termination will become effective thirty (30) days after
receipt by the non-terminating party of such notice. The provisions of Section
3.3 hereof shall govern the delegation to and termination of the Custodian as
Foreign Custody Manager of the Portfolios with respect to designated countries.
SECTION 4.
DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE
PORTFOLIOS HELD OUTSIDE OF THE UNITED STATES
SECTION 4.1 DEFINITIONS. Capitalized terms in this Section 4 shall have
the following meanings:
"FOREIGN SECURITIES SYSTEM" means either a clearing agency or a securities
depository listed on Schedule A hereto or a Mandatory Securities Depository
listed on Schedule B hereto.
"FOREIGN SUB-CUSTODIAN" means a foreign banking institution serving as an
Eligible Foreign Custodian.
SECTION 4.2 HOLDING SECURITIES. The Custodian shall identify on its
books as belonging to the Portfolios the foreign securities held by each Foreign
Sub-Custodian or Foreign Securities System. The Custodian may hold foreign
securities for all of its customers, including the Portfolios, with any Foreign
Sub-Custodian in an account that is identified as belonging to the Custodian for
the benefit of its customers, provided however, that (i) the records of the
Custodian with respect to foreign securities of the Portfolios which are
maintained in such account shall identify those securities as belonging to the
Portfolios and (ii) the Custodian shall require that securities so held by the
Foreign Sub-Custodian be held separately from any assets of such Foreign
Sub-Custodian or of other customers of such Foreign Sub-Custodian.
SECTION 4.3 FOREIGN SECURITIES SYSTEMS. Foreign securities shall be
maintained in a Foreign Securities System in a designated country only through
arrangements implemented by the Foreign Sub-Custodian in such country pursuant
to the terms of this Agreement.
SECTION 4.4 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT.
4.4.1 Delivery of Foreign Securities. The Custodian or a Foreign
Sub-Custodian shall release and deliver foreign securities of the Portfolios
held by such Foreign Sub-Custodian, or in a Foreign Securities System account,
only upon receipt of Proper Instructions, which may be continuing instructions
when deemed appropriate by the parties, and only in the following cases:
(i) upon the sale of such foreign securities for the Portfolios in
accordance with market practice generally accepted by
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institutional investors in the country where such foreign
securities are held or traded, including, without limitation: (A)
delivery against expectation of receiving later payment; or (B)
in the case of a sale effected through a Foreign Securities
System in accordance with the rules governing the operation of
the Foreign Securities System;
(ii) in connection with any repurchase agreement related to foreign
securities;
(iii) to the depository agent in connection with tender or other
similar offers for foreign securities of the Portfolios;
(iv) to the issuer thereof or its agent when such foreign securities
are called, redeemed, retired or otherwise become payable;
(v) to the issuer thereof, or its agent, for transfer into the name
of the Custodian (or the name of the respective Foreign
Sub-Custodian or of any nominee of the Custodian or such Foreign
Sub-Custodian) or for exchange for a different number of bonds,
certificates or other evidence representing the same aggregate
face amount or number of units;
(vi) to brokers, clearing banks or other clearing agents for
examination or trade execution in accordance with market custom;
provided that in any such case the Foreign Sub-Custodian shall
have no responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for such
securities except as may arise from the Foreign Sub-Custodian's
own negligence or willful misconduct;
(vii) for exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment
of the securities of the issuer of such securities, or pursuant
to provisions for conversion contained in such securities, or
pursuant to any deposit agreement;
(viii) in the case of warrants, rights or similar foreign securities,
the surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities;
(ix) or delivery as security in connection with any borrowing by the
Portfolios requiring a pledge of assets by the Portfolios;
(x) in connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
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(xi) in connection with the lending of foreign securities; and
(xii) for any other proper trust purpose, but only upon receipt of
written Proper Instructions specifying the foreign securities to
be delivered, setting forth the purpose for which such delivery
is to be made, declaring such purpose to be a proper trust
purpose, and naming the person or persons to whom delivery of
such securities shall be made.
4.4.2 Payment of Portfolio Monies. Upon receipt of Proper Instructions,
which may be continuing instructions when deemed appropriate by the parties, the
Custodian shall pay out, or direct the respective Foreign Sub-Custodian or the
respective Foreign Securities System to pay out, monies of Portfolio in the
following cases only:
(i) upon the purchase of foreign securities for the Portfolio, unless
otherwise directed by Proper Instructions, by (A) delivering
money to the seller thereof or to a dealer therefor (or an agent
for such seller or dealer) against expectation of receiving later
delivery of such foreign securities; or (B) in the case of a
purchase effected through a Foreign Securities System, in
accordance with the rules governing the operation of such Foreign
Securities System;
(ii) in connection with the conversion, exchange or surrender of foreign
securities of the Portfolio;
(iii) for the payment of any expense or liability of the Portfolio,
including but not limited to the following payments: interest,
taxes, investment advisory fees, transfer agency fees, fees under
this Agreement, legal fees, accounting fees, and other operating
expenses;
(iv) for the purchase or sale of foreign exchange or foreign exchange
contracts for the Portfolio, including transactions executed with
or through the Custodian or its Foreign Sub-Custodians;
(v) in connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
(vii) in connection with the borrowing or lending of foreign
securities; and
(viii) for any other proper trust purpose, but only upon receipt of
written Proper Instructions specifying the amount of such
payment, setting forth the purpose for which such payment is to
be made, declaring such purpose to be a proper trust purpose, and
naming the person or persons to whom such payment is to be made.
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4.4.3 Market Conditions; Market Information. Notwithstanding any
provision of this Agreement to the contrary, settlement and payment for Foreign
Assets received for the account of the Portfolios and delivery of Foreign Assets
maintained for the account of the Portfolios may be effected in accordance with
the customary established securities trading or processing practices and
procedures generally accepted by institutional investors in the country or
market in which the transaction occurs, including, without limitation,
delivering Foreign Assets to the purchaser thereof or to a dealer therefor (or
an agent for such purchaser or dealer) with the expectation of receiving later
payment for such Foreign Assets from such purchaser or dealer.
The Custodian will provide the Trust the information with respect to
custody and settlement practices in countries in which the Custodian employs a
Foreign Sub-Custodian, including without limitation information relating to
Foreign Securities Systems, described on Schedule E hereto at the time or times
set forth on such Schedule. The Custodian may revise Schedule E from time to
time, provided that no such revision shall result in the Trust being provided
with substantively less information than had been previously provided hereunder.
SECTION 4.5 REGISTRATION OF FOREIGN SECURITIES. The foreign securities
maintained in the custody of a Foreign Custodian (other than bearer securities)
shall be registered in the name of the applicable Portfolio or in the name of
the Custodian or in the name of any Foreign Sub-Custodian or in the name of any
nominee of the foregoing, and the Trust on behalf of such Portfolio agrees to
hold any such nominee harmless from any liability as a holder of record of such
foreign securities. The Custodian or a Foreign Sub-Custodian shall not be
obligated to accept securities on behalf of a Portfolio under the terms of this
Agreement unless the form of such securities and the manner in which they are
delivered are in accordance with reasonable market practice.
SECTION 4.6 BANK ACCOUNTS. The Custodian shall identify on its books as
belonging to a Portfolio cash (including cash denominated in foreign currencies)
deposited with the Custodian. Where the Custodian is unable to maintain, or
market practice does not facilitate the maintenance of, cash on the books of the
Custodian, a bank account or bank accounts opened and maintained outside the
United States on behalf of a Portfolio with a Foreign Sub-Custodian shall be
subject only to draft or order by the Custodian or such Foreign Sub-Custodian,
acting pursuant to the terms of this Agreement to hold cash received by or from
or for the account of the Portfolio.
SECTION 4.7 COLLECTION OF INCOME. The Custodian shall use reasonable
commercial efforts to collect all income and other payments with respect to the
Foreign Assets held hereunder to which the Portfolios shall be entitled and
shall credit such income, as collected, to the applicable Portfolio. In the
event that extraordinary measures are required to collect such income, the Trust
and the Custodian shall consult as to such measures and as to the compensation
and expenses of the Custodian relating to such measures.
SECTION 4.8 SHAREHOLDER RIGHTS. With respect to the foreign securities
held pursuant to this Agreement, the Custodian will use its reasonable
commercial efforts to facilitate the exercise of voting and other shareholder
proxy rights, subject always to the laws, regulations and practical constraints
that may exist in the country where such securities are issued. The Trust
acknowledges that local conditions, including lack of regulation, onerous
procedural obligations, lack of notice and other factors may have the effect of
severely limiting the ability of the Trust to exercise shareholder rights.
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SECTION 4.9 COMMUNICATIONS RELATING TO FOREIGN SECURITIES. The Custodian
shall transmit promptly to the Trust written information (including, without
limitation, pendency of calls and maturities of foreign securities and
expirations of rights in connection therewith) received by the Custodian via the
Foreign Sub-Custodians from issuers of the foreign securities being held for the
account of the Portfolios. With respect to tender or exchange offers, the
Custodian shall transmit promptly to the Trust written information so received
by the Custodian from issuers of the foreign securities whose tender or exchange
is sought or from the party (or its agents) making the tender or exchange offer.
The Custodian shall not be liable for any untimely exercise of any tender,
exchange or other right or power in connection with foreign securities or other
property of the Portfolios at any time held by it unless (i) the Custodian or
the respective Foreign Sub-Custodian is in actual possession of such foreign
securities or property and (ii) the Custodian receives Proper Instructions with
regard to the exercise of any such right or power, and both (i) and (ii) occur
at least three (3) business days prior to the date on which the Custodian is to
take such action to exercise such right or power.
SECTION 4.10 LIABILITY OF FOREIGN SUB-CUSTODIANS AND FOREIGN SECURITIES
SYSTEMS. Each agreement pursuant to which the Custodian employs as a Foreign
Sub-Custodian shall, to the extent possible, require the Foreign Sub-Custodian
to exercise reasonable care in the performance of its duties and, to the extent
possible, to indemnify, and hold harmless, the Custodian from and against any
loss, damage, cost, expense, liability or claim arising out of or in connection
with the institution's performance of such obligations. At the election of the
Trust, the Portfolios shall be entitled to be subrogated to the rights of the
Custodian with respect to any claims against a Foreign Sub-Custodian as a
consequence of any such loss, damage, cost, expense, liability or claim if and
to the extent that the Portfolios have not been made whole for any such loss,
damage, cost, expense, liability or claim.
SECTION 4.11 TAX LAW. The Custodian shall have no responsibility or
liability for any obligations now or hereafter imposed on the Trust, the
Portfolios or the Custodian as custodian of the Portfolios by the tax law of the
United States or of any state or political subdivision thereof. It shall be the
responsibility of the Trust to notify the Custodian of the obligations imposed
on the Trust with respect to the Portfolios or the Custodian as custodian of the
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Portfolios by the tax law of countries other than those mentioned in the above
sentence, including responsibility for withholding and other taxes, assessments
or other governmental charges, certifications and governmental reporting. The
sole responsibility of the Custodian with regard to such tax law shall be to use
reasonable efforts to assist the Trust with respect to any claim for exemption
or refund under the tax law of countries for which the Trust has provided such
information.
SECTION 4.12 CONFLICT. If the Custodian is delegated the
responsibilities of Foreign Custody Manager pursuant to the terms of Section 3
hereof, in the event of any conflict between the provisions of Sections 3 and 4
hereof, the provisions of Section 3 shall prevail.
SECTION 4(A). CONTRACTUAL SETTLEMENT
SECTION 4(A).1 SCHEME OF CONTRACTUAL SERVICES.
(a) Subject to paragraphs (b) and (c) below and Sections 4.4.1, 4.4.2
and 4.4.3 hereof, the Custodian shall credit or debit the
appropriate account of each Portfolio in connection with (i) the
purchases of, (ii) income or dividends associated with, or (iii)
proceeds of the sale, maturity, redemption, or other disposition
of, securities and other assets held for the time being on behalf
of a Portfolio on a contractual settlement basis.
(b) The Custodian may make available provisional credit of
settlement, maturity, redemption proceeds on a contractual
settlement basis in the markets set forth on Schedule C hereto
when the Custodian has a reasonable expectation that the
transaction will settle in due course. The Custodian reserves the
right to reverse any such crediting at any time before actual
receipt of the item associated with the credit when the Custodian
determines that such transaction will not settle in accordance
with its terms or that amounts due pursuant thereto will not be
collectable, or the Custodian has not been provided with Proper
Instructions with respect thereto. In such instances, the
Custodian may charge the appropriate account of the applicable
Portfolio for the expense of providing funds associated with such
advance in an amount not to exceed a commercially reasonable
rate.
(c) With respect to the markets set forth on Schedule C hereto, the
consideration payable in connection with a purchase transaction
shall be debited from the appropriate account of the applicable
Portfolio upon the contractual settlement date for the relevant
purchase transaction. The Custodian shall promptly recredit such
amount at the time that the Portfolio notifies the Custodian by
Proper Instruction that such transaction has been canceled.
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SECTION 4(A).2 MARKETS ELIGIBLE FOR CONTRACTUAL SERVICES. The
services described in Section 4(A).1 hereof (for the purposes of this Section
4(A), the "Services") shall be provided with respect to the applicable
securities transactions in the countries set forth on Schedule C attached
hereto.
SECTION 4(A).3 OBLIGATIONS. All payments made under this Section 4(A)
are made subject to actual collection; the Custodian shall not be liable to the
Trust or the Portfolios for any amount that is not actually collected in
accordance with the terms hereof. The provision of the Services is intended to
facilitate settlement in ordinary course. The Custodian may terminate provision
of Services under Section 4(A)1(b) immediately upon notice to Trust,
particularly with respect to the occurrence of force majeure events affecting
settlement, any disorder in markets, or other changed external business
circumstances.
SECTION 5. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES
The Custodian shall receive from the distributor for the Shares or from
the Transfer Agent and deposit into the account of the appropriate Portfolio
such payments as are received for Shares thereof issued or sold from time to
time by the Trust. The Custodian will provide timely notification to the Trust
on behalf of each such Portfolio and the Transfer Agent of any receipt by it of
payments for Shares of such Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Trust's Declaration of Trust and any applicable votes of the
Board of Trustees pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for payment to
holders of Shares who have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the redemption or
repurchase of Shares, the Custodian is authorized upon receipt of instructions
from the Transfer Agent to wire funds to or through a commercial bank designated
by the redeeming shareholders. In connection with the redemption or repurchase
of Shares, the Custodian shall honor checks drawn on the Custodian by a holder
of Shares, which checks have been furnished by the Trust to the holder of
Shares, when presented to the Custodian in accordance with such procedures and
controls as are mutually agreed upon from time to time between the Trust and the
Custodian.
SECTION 6. PROPER INSTRUCTIONS
Proper Instructions as used throughout this Agreement means a writing
signed or initialed by one or more person or persons as the Board of Trustees
shall have from time to time authorized. Each such writing shall set forth the
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specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes them
to have been given by a person authorized to give such instructions with respect
to the transaction involved. The Trust shall cause all oral instructions to be
confirmed in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of Trustees accompanied
by a detailed description of procedures approved by the Board of Trustees,
Proper Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Board of Trustees and
the Custodian are satisfied that such procedures afford adequate safeguards for
the Portfolios' assets. For purposes of this Section, Proper Instructions shall
include instructions received by the Custodian pursuant to any three - party
agreement which requires a segregated asset account in accordance with Section
2.11.
SECTION 7. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from the
Trust on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under
this Agreement, provided that all such payments shall be
accounted for to the Trust on behalf of the Portfolio;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Portfolio, checks,
drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and
other dealings with the securities and property of the Portfolio
except as otherwise directed by the Board of Trustees.
SECTION 8. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper reasonably
believed by it to be genuine and to have been properly executed by or on behalf
of the Trust. The Custodian may receive and accept a Certified Resolution as
conclusive evidence (a) of the authority of any person to act in accordance with
such resolution or (b) of any determination or of any action by the Board of
Trustees pursuant to the Trust's Declaration of Trust as described in such
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resolution, and such resolution may be considered as in full force and effect
until receipt by the Custodian of written notice to the contrary.
SECTION 9. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND
CALCULATION OF NET ASSET VALUE AND NET INCOME
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Trustees to keep the books of
account of each Portfolio and/or compute the net asset value per Share of the
outstanding Shares or, if directed in writing to do so by the Trust on behalf of
the Portfolio, shall itself keep such books of account and/or compute such net
asset value per Share. If so directed, the Custodian shall also calculate daily
the net income of the Portfolio as described in the Prospectus related to such
Portfolio and shall advise the Trust and the Transfer Agent daily of the total
amounts of such net income and, if instructed in writing by an officer of the
Trust to do so, shall advise the Transfer Agent periodically of the division of
such net income among its various components. The calculations of the net asset
value per Share and the daily income of each Portfolio shall be made at the time
or times described from time to time in the Prospectus related to such
Portfolio.
SECTION 10. RECORDS
The Custodian shall with respect to each Portfolio create and maintain
all records relating to its activities and obligations under this Agreement in
such manner as will meet the obligations of the Trust under the 1940 Act, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder.
All such records shall be the property of the Trust and shall at all times
during the regular business hours of the Custodian be open for inspection by
duly authorized officers, employees or agents of the Trust and employees and
agents of the SEC. The Custodian shall, at the Trust's request, supply the Trust
with a tabulation of securities owned by each Portfolio and held by the
Custodian and shall, when requested to do so by the Trust and for such
compensation as shall be agreed upon between the Trust and the Custodian,
include certificate numbers in such tabulations.
SECTION 11. OPINION OF TRUST'S INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as the Trust on behalf
of each applicable Portfolio may from time to time request, to obtain from year
to year favorable opinions from the Trust's independent accountants with respect
to its activities hereunder in connection with the preparation of the Trust's
Form N-1A, and Form N-SAR or other annual reports to the SEC and with respect to
any other requirements thereof.
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SECTION 12. REPORTS TO TRUST BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Trust, on behalf of each of the
Portfolios at such times as the Trust may reasonably require, with reports by
independent public accountants on the accounting system, internal accounting
control and procedures for safeguarding securities, futures contracts and
options on futures contracts, including securities deposited and/or maintained
in a U.S. Securities System or a Foreign Securities System (collectively
referred to herein as the "SECURITIES SYSTEMS"), relating to the services
provided by the Custodian under this Agreement; such reports, shall be of
sufficient scope and in sufficient detail, as may reasonably be required by the
Trust to provide reasonable assurance that any material inadequacies would be
disclosed by such examination, and, if there are no such inadequacies, the
reports shall so state.
SECTION 13. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Trust on behalf of each applicable Portfolio and the Custodian.
SECTION 14. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Agreement and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Agreement,
but shall be kept indemnified by and shall be without liability to the Trust for
any action taken or omitted by it in good faith without negligence. It shall be
entitled to rely on and may act upon advice of counsel (who may be counsel for
the Trust) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice. The Custodian shall be
without liability to the Trust and the Portfolios for any loss, liability, claim
or expense resulting from or caused by anything which is (A) part of Country
Risk (as defined in Section 3 hereof), including without limitation
nationalization, expropriation, currency restrictions, or acts of war,
revolution, riots or terrorism, or (B) part of the "prevailing country risk" of
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the Portfolios, as such term is used in SEC Release Nos. IC-22658; IS-1080 (May
12, 1997) or as such term or other similar terms are now or in the future
interpreted by the SEC or by the staff of the Division of Investment Management
thereof.
Except as may arise from the Custodian's own negligence or willful
misconduct or the negligence or willful misconduct of a sub-custodian or agent,
the Custodian shall be without liability to the Trust for any loss, liability,
claim or expense resulting from or caused by; (i) events or circumstances beyond
the reasonable control of the Custodian or any sub-custodian or Securities
System or any agent or nominee of any of the foregoing, including, without
limitation, the interruption, suspension or restriction of trading on or the
closure of any securities market, power or other mechanical or technological
failures or interruptions, computer viruses or communications disruptions, work
stoppages, natural disasters, or other similar events or acts; (ii) errors by
the Trust or the Investment Advisor in their instructions to the Custodian
provided such instructions have been in accordance with this Agreement; (iii)
the insolvency of or acts or omissions by a Securities System; (iv) any delay or
failure of any broker, agent or intermediary, central bank or other commercially
prevalent payment or clearing system to deliver to the Custodian's sub-custodian
or agent securities purchased or in the remittance or payment made in connection
with securities sold; (v) any delay or failure of any company, corporation, or
other body in charge of registering or transferring securities in the name of
the Custodian, the Trust, the Custodian's sub-custodians, nominees or agents or
any consequential losses arising out of such delay or failure to transfer such
securities including non-receipt of bonus, dividends and rights and other
accretions or benefits; (vi) delays or inability to perform its duties due to
any disorder in market infrastructure with respect to any particular security or
Securities System; and (vii) any provision of any present or future law or
regulation or order of the United States of America, or any state thereof, or
any other country, or political subdivision thereof or of any court of competent
jurisdiction.
The Custodian shall be liable for the acts or omissions of a Foreign
Sub-Custodian (as defined in Section 4 hereof) to the same extent as set forth
with respect to sub-custodians generally in this Agreement.
If the Trust on behalf of a Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money or
which action may, in the opinion of the Custodian, result in the Custodian or
its nominee assigned to the Trust or the Portfolio being liable for the payment
of money or incurring liability of some other form, the Trust on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
it.
If the Trust requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not limited
to securities settlements, foreign exchange contracts and assumed settlement) or
in the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
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the performance of this Agreement, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the applicable Portfolio shall
be security therefor and should the Trust fail to repay the Custodian promptly,
the Custodian shall be entitled to utilize available cash and to dispose of such
Portfolio's assets to the extent necessary to obtain reimbursement.
In no event shall the Custodian be liable for indirect, special or
consequential damages.
SECTION 15. MITIGATION BY CUSTODIAN
Upon the occurrence of any event connected with the Custodian under this
Agreement which causes or may cause any loss, damage or expense to the Trust or
any Portfolio, the Custodian shall, and shall exercise reasonable efforts to
cause any Foreign Sub-Custodian to, use reasonable efforts under the
circumstances to mitigate the effect of such event and to avoid continuing harm
to the Trust and the Portfolios.
SECTION 16. NOTIFICATION OF LITIGATION; RIGHT TO PROCEED
In any case in which the Trust may be asked to indemnify or hold the
Custodian harmless, the Trust shall be fully and promptly advised of all
pertinent facts concerning the situation in question, and it is further
understood that the Custodian will use all reasonable care to identify and
notify the Trust promptly concerning any situation which presents or appears
likely to present the probability of such claim for indemnification against the
Trust; provided, however, that the failure to so advise, identify or notify the
Trust shall not in any way limit the Trust's liability for indemnification under
this Agreement with respect to any such claim to the extent that the defense
thereof is not materially prejudiced by such failure. If the Trust acknowledges
in writing that the Custodian is entitled to indemnification, the Trust shall
have the option to defend the Custodian against any claim which may be the
subject of this indemnification, and in the event that the Trust so elects, it
will so notify the Custodian, and thereupon the Trust shall take over complete
defense of the claim. In the event the Trust elects to assume the control of the
defense of the claim, the Custodian may participate in such proceeding and
retain additional counsel but shall bear all fees and expenses of such retention
of such counsel, unless (i) the Trust shall have specifically authorized the
retention of such counsel, or (ii) if the Trust and the Custodian agree that the
retention of such counsel is required as a result of a conflict of interest. In
the event the Trust assumes control of any proceeding, the Trust shall keep the
Custodian notified of the progress of such proceeding and, upon request, consult
with the Custodian and counsel. The Trust will, upon request by the Custodian,
either pay in the first instance or reimburse the Custodian for any expenses
subject to indemnity hereunder. The Trust shall not settle or compromise any
proceeding without the prior written consent of the Custodian unless (i) such
settlement or compromise involves no admission of guilt, wrongdoing, or
misconduct by the Custodian, (ii) such settlement or compromise does not impose
any obligations or restrictions on the Custodian other than obligations to pay
money that are subject to indemnity under this Agreement, and (iii) the Trust
shall have paid, or made arrangements satisfactory to the Custodian for payment
of amounts payable by the Custodian in connection with such settlement. The
Custodian shall in no case confess any claim or make any compromise in any case
in which the Trust will be asked to indemnify the Custodian except with the
Trust's prior written consent.
SECTION 17. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
This Agreement shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than sixty (60) days after the date of such delivery or mailing; provided,
however that the Custodian shall not with respect to a Portfolio act under
Section 2.9 hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board of Trustees has approved the
initial use of a particular Securities System by such Portfolio, as required by
Rule 17f-4 under the 1940 Act and that the Custodian shall not with respect to a
Portfolio act under Section 2.10 hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Board of
Trustees has approved the initial use of the Direct Paper System by such
Portfolio; provided further, however, that the Trust shall not amend or
terminate this Agreement in contravention of any applicable federal or state
regulations, or any provision of the Trust's Declaration of Trust, and further
provided, that the Trust on behalf of one or more of the Portfolios may at any
25
<PAGE>
time by action of its Board of Trustees (i) substitute another bank or trust
company for the Custodian by giving notice as described above to the Custodian,
or (ii) immediately terminate this Agreement in the event of the appointment of
a conservator or receiver for the Custodian by the Comptroller of the Currency
or upon the happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction.
Upon termination of the Agreement, the Trust on behalf of each
applicable Portfolio shall pay to the Custodian such compensation as may be due
as of the date of such termination and shall likewise reimburse the Custodian
for its reasonable costs, expenses and disbursements.
SECTION 18. SUCCESSOR CUSTODIAN
If a successor custodian for the Trust, of one or more of the Portfolios
shall be appointed by the Board of Trustees, the Custodian shall, upon
termination, deliver to such successor custodian at the office of the Custodian,
26
<PAGE>
duly endorsed and in the form for transfer, all securities of each applicable
Portfolio then held by it hereunder and shall transfer to an account of the
successor custodian all of the securities of each such Portfolio held in a
Securities System.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a Certified Resolution, deliver at the office of
the Custodian and transfer such securities, funds and other properties in
accordance with such resolution.
In the event that no written order designating a successor custodian or
Certified Resolution shall have been delivered to the Custodian on or before the
date when such termination shall become effective, then the Custodian shall have
the right to deliver to a bank or trust company, which is a "bank" as defined in
the 1940 Act doing business in Boston, Massachusetts, of its own selection,
having an aggregate capital, surplus, and undivided profits, as shown by its
last published report, of not less than $25,000,000, all securities, funds and
other properties held by the Custodian on behalf of each applicable Portfolio
and all instruments held by the Custodian relative thereto and all other
property held by it under this Agreement on behalf of each applicable Portfolio
and to transfer to an account of such successor custodian all of the securities
of each such Portfolio held in any Securities System. Thereafter, such bank or
trust company shall be the successor of the Custodian under this Agreement.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Trust to procure the Certified Resolution to appoint a successor
custodian, the Custodian shall be entitled to fair compensation for its services
during such period as the Custodian retains possession of such securities, funds
and other properties and the provisions of this Agreement relating to the duties
and obligations of the Custodian shall remain in full force and effect.
SECTION 19. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Agreement, the Custodian and
the Trust on behalf of each of the Portfolios, may from time to time agree on
such provisions interpretive of or in addition to the provisions of this
Agreement as may in their joint opinion be consistent with the general tenor of
this Agreement. Any such interpretive or additional provisions shall be in a
writing signed by both parties and shall be annexed hereto, provided that no
such interpretive or additional provisions shall contravene any applicable
federal or state regulations or any provision of the Trust's Declaration of
Trust. No interpretive or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this Agreement.
27
<PAGE>
SECTION 20. ADDITIONAL PORTFOLIOS
In the event that the Trust establishes one or more series of Shares
with respect to which it desires to have the Custodian render services as
custodian pursuant to the terms hereof, it shall so notify the Custodian in
writing, and if the Custodian agrees in writing to provide such services, such
series of Shares shall become a Portfolio hereunder and Schedule D hereto shall
be revised to so reflect.
SECTION 21. MASSACHUSETTS LAW TO APPLY
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
SECTION 22. RECOURSE AGAINST SHAREHOLDERS, OFFICERS AND TRUSTEES
This Agreement is executed by the officers of the Trust in their
capacity as such and not individually. Any responsibility or liability of the
Trust (or a particular Portfolio) under any provision of this Contract shall be
satisfied solely from the assets of the Trust or the particular Portfolio,
tangible or intangible, realized or unrealized, and in no event shall the
Custodian, a sub-custodian or agent have any recourse against the shareholders,
officers or Trustees of the Trust under this Contract or against any one
Portfolio for the obligations of any other Portfolio. The execution and delivery
of this Agreement have been authorized by the Board of Trustees, and this
Agreement has been executed and delivered by an authorized officer of the Trust
acting as such; neither such authorization by the Trustees nor execution and
delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on them personally, but shall only bind
the assets and property of the Trust.
SECTION 23. CONFIDENTIALITY.
None of the parties hereto shall, unless compelled to do so by any court
of competent jurisdiction either before or after the termination of this
Agreement, disclose to any person not authorized by the relevant party to
receive the same any information relating to such party and to the affairs of
such party of which the party disclosing the same shall have become possessed
during the period of this Agreement and each party shall use its best endeavors
to prevent any such disclosure as aforesaid.
28
<PAGE>
SECTION 24. ASSIGNMENT.
This Agreement may not be assigned by either party without the written
consent of the other.
SECTION 25. SEVERABILITY.
In the event any provision of this Agreement is held illegal, void or
unenforceable, the balance shall remain in effect.
SECTION 26. PRIOR AGREEMENTS
This Agreement supersedes and terminates, as of the date hereof, all
prior Agreements between the Trust on behalf of each of the Portfolios and the
Custodian relating to the custody of the Trust's assets.
SECTION 27. NOTICES.
Any notice, instruction or other instrument required to be given
hereunder may be delivered in person to the offices of the parties as set forth
herein during normal business hours or delivered prepaid registered mail or by
telex, cable or telecopy to the parties at the following addresses or such other
addresses as may be notified by any party from time to time:
To the Trust: AMERICAN SELECT FUNDS
4333 Amon Carter Boulevard, Maildrop 5645
Fort Worth, Texas 76155
Attention: William F. Quinn, President
Telephone: 817-967-3509
Telecopy: 817-967-0768
To the Custodian: STATE STREET BANK AND TRUST COMPANY
Allan Forbes Building
150 Newport Avenue
North Quincy, Massachusetts 02171
Attention: Frank J. Sidoti, Jr.
Telephone: 617-985-5262
Telecopy: 617-985-6130
29
<PAGE>
Such notice, instruction or other instrument shall be deemed to have
been served in the case of a registered letter at the expiration of five
business days after posting, in the case of cable twenty-four hours after
dispatch and, in the case of telex, immediately on dispatch and if delivered
outside normal business hours it shall be deemed to have been received at the
next time after delivery when normal business hours commence and in the case of
cable, telex or telecopy on the business day after the receipt thereof. Evidence
that the notice was properly addressed, stamped and put into the post shall be
conclusive evidence of posting.
SECTION 28. REPRODUCTION OF DOCUMENTS
This Agreement and all schedules, exhibits, attachments and amendments
hereto may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The parties hereto
all/each agree that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not the
original is in existence and whether or not such reproduction was made by a
party in the regular course of business, and that any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible in
evidence.
SECTION 29. SHAREHOLDER COMMUNICATIONS ELECTION
SEC Rule 14b-2 requires banks which hold securities for the account of
customers to respond to requests by issuers of securities for the names,
addresses and holdings of beneficial owners of securities of that issuer held by
the bank unless the beneficial owner has expressly objected to disclosure of
this information. In order to comply with the rule, the Custodian needs the
Trust to indicate whether it authorizes the Custodian to provide the Trust's
name, address, and share position to requesting companies whose securities the
Trust owns. If the Trust tells the Custodian "no", the Custodian will not
provide this information to requesting companies. If the Trust tells the
Custodian "yes" or does not check either "yes" or "no" below, the Custodian is
required by the rule to treat the Trust as consenting to disclosure of this
information for all securities owned by the Trust or any funds or accounts
established by the Trust. For the Trust's protection, the Rule prohibits the
requesting company from using the Trust's name and address for any purpose other
than corporate communications. Please indicate below whether the Trust consents
or objects by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Trust's name,
address, and share positions.
NO [ ] The Custodian is not authorized to release the Trust's
name, address, and share positions.
30
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of [ ], 1999.
AMERICAN SELECT FUNDS
By:______________________________
Its: President
STATE STREET BANK AND TRUST COMPANY
By:______________________________
Its: Vice Chairman
<PAGE>
SCHEDULE C
COUNTRIES/SETTLEMENT SYSTEMS WITH RESPECT TO WHICH
CONTRACTUAL SETTLEMENT MAY BE PROVIDED
Australia
Austria
Belgium
Canada
Denmark
Euroclear
Finland
France
Germany
Hong Kong
Italy
Japan
Netherlands
New Zealand
Norway
Portugal
Singapore
Spain
Sweden
Switzerland
United Kingdom
<PAGE>
SCHEDULE D
PORTFOLIOS
Name of Portfolio Effective Date
----------------- --------------
AMERICAN SELECT CASH RESERVE FUND [ ]
REVISED 4/15/99
TRANSFER AGENCY AND SERVICE AGREEMENT
between
(Name of Mutual Fund, Trust or Company)
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
1. Terms of Appointment and Duties...............................................1
2. Third Party Administrators for Defined Contribution Plans ....................4
3. Fees and Expenses.............................................................5
4. Representations and Warranties of the Transfer Agent..........................5
5. Representations and Warranties of the Fund....................................6
6. Wire Transfer Operating Guidelines............................................6
7. Data Access and Proprietary Information.......................................8
8. Indemnification..............................................................10
9. Standard of Care.............................................................11
10. Year 2000....................................................................11
11. Confidentiality .............................................................11
12. Covenants of the Fund and the Transfer Agent.................................12
13. Termination of Agreement.....................................................13
14. Assignment and Third Party Beneficiaries.....................................13
15. Subcontractors...............................................................13
16. Miscellaneous................................................................14
17. Additional Funds.............................................................15
18. Limitations of Liability of the Trustees and Shareholders....................15
</TABLE>
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
-------- ------ --- ------- ---------
AGREEMENT made as of the day of , 199 , by and between , a _________business
trust, having its principal office and place of business at _________(the
"Fund"), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company
having its principal office and place of business at 225 Franklin Street,
Boston, Massachusetts 02110 (the "Transfer Agent").
WHEREAS, the Fund is authorized to issue shares in separate series, with each
such series representing interests in a separate portfolio of securities and
other assets;
WHEREAS, the Fund intends to initially offer shares in series, such series shall
be named in the attached Schedule A which may be amended by the parties from
time to time (each such series, together with all other series subsequently
established by the Fund and made subject to this Agreement in accordance with
Section 17, being herein referred to as a "Portfolio", and collectively as the
"Portfolios"); and
WHEREAS, the Fund on behalf of the Portfolios desires to appoint the Transfer
Agent as its transfer agent, dividend disbursing agent, custodian of certain
retirement plans and agent in connection with certain other activities, and the
Transfer Agent desires to accept such appointment.
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
l. Terms of Appointment and Duties
-------------------------------
1.1 TRANSFER AGENCY SERVICES. Subject to the terms and conditions set forth
in this Agreement, the Fund, on behalf of the Portfolios, hereby employs
and appoints the Transfer Agent to act as, and the Transfer Agent agrees
to act as its transfer agent for the Fund's authorized and issued shares
of its beneficial interest, $ par value, ("Shares"), dividend disbursing
agent, custodian of certain retirement plans and agent in connection
with any accumulation, open-account or similar plan provided to the
shareholders of each of the respective Portfolios of the Fund
("Shareholders") and set out in the currently effective prospectus and
statement of additional information ("prospectus") of the Fund on behalf
of the applicable Portfolio, including without limitation any periodic
investment plan or periodic withdrawal program. In accordance with
procedures established from time to time by agreement between the Fund
on behalf of each of the Portfolios, as applicable and the Transfer
Agent, the Transfer Agent agrees that it will perform the following
services:
(a) Receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation thereof to the
Custodian of the Fund authorized pursuant to the Declaration of Trust of
the Fund (the "Custodian");
(b) Pursuant to purchase orders, issue the appropriate number of Shares
and hold such Shares in the appropriate Shareholder account;
(c) Receive for acceptance redemption requests and redemption directions
and deliver the appropriate documentation thereof to the Custodian;
<PAGE>
(d) In respect to the transactions in items (a), (b) and (c) above, the
Transfer Agent shall execute transactions directly with broker-dealers
authorized by the Fund;
(e) At the appropriate time as and when it receives monies paid to it by
the Custodian with respect to any redemption, pay over or cause to be
paid over in the appropriate manner such monies as instructed by the
redeeming Shareholders;
(f) Effect transfers of Shares by the registered owners thereof upon
receipt of appropriate instructions;
(g) Prepare and transmit payments for dividends and distributions
declared by the Fund on behalf of the applicable Portfolio;
(h) Issue replacement certificates for those certificates alleged to
have been lost, stolen or destroyed upon receipt by the Transfer Agent
of indemnification satisfactory to the Transfer Agent and protecting the
Transfer Agent and the Fund, and the Transfer Agent at its option, may
issue replacement certificates in place of mutilated stock certificates
upon presentation thereof and without such indemnity;
(i) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(j) Record the issuance of Shares of the Fund and maintain pursuant to
SEC Rule 17Ad-10(e) a record of the total number of Shares of the Fund
which are authorized, based upon data provided to it by the Fund, and
issued and outstanding. The Transfer Agent shall also provide the Fund
on a regular basis with the total number of Shares which are authorized
and issued and outstanding and shall have no obligation, when recording
the issuance of Shares, to monitor the issuance of such Shares or to
take cognizance of any laws relating to the issue or sale of such
Shares, which functions shall be the sole responsibility of the Fund.
1.2 ADDITIONAL SERVICES. In addition to, and neither in lieu nor in
contravention of, the services set forth in the above paragraph, the
Transfer Agent shall perform the following services:
(a) OTHER CUSTOMARY SERVICES. Perform the customary services of a
transfer agent, dividend disbursing agent, custodian of certain
retirement plans and, as relevant, agent in connection with
accumulation, open-account or similar plan (including without limitation
any periodic investment plan or periodic withdrawal program), including
but not limited to: maintaining all Shareholder accounts, preparing
Shareholder meeting lists, mailing Shareholder proxies, Shareholder
reports and prospectuses to current Shareholders, withholding taxes on
U.S. resident and non-resident alien accounts, preparing and filing U.S.
Treasury Department Forms 1099 and other appropriate forms required with
2
<PAGE>
respect to dividends and distributions by federal authorities for all
Shareholders, preparing and mailing confirmation forms and statements of
account to Shareholders for all purchases and redemptions of Shares and
other confirmable transactions in Shareholder accounts, preparing and
mailing activity statements for Shareholders, and providing Shareholder
account information.
(b) CONTROL BOOK (ALSO KNOWN AS "SUPER SHEET"). Maintain a daily record
and produce a daily report for the Fund of all transactions and receipts
and disbursements of money and securities and deliver a copy of such
report for the Fund for each business day to the Fund no later than 9:00
AM Eastern Time, or such earlier time as the Fund may reasonably
require, on the next business day.
(c) "BLUE SKY" REPORTING. The Fund shall (i) identify to the Transfer
Agent in writing those transactions and assets to be treated as exempt
from blue sky reporting for each State; and (ii) verify the
establishment of transactions for each State on the system prior to
activation and thereafter monitor the daily activity for each State. The
responsibility of the Transfer Agent for the Fund's blue sky State
registration status is solely limited to the initial establishment of
transactions subject to blue sky compliance by the Fund and providing a
system which will enable the Fund to monitor the total number of Shares
sold in each State.
(d) NATIONAL SECURITIES CLEARING CORPORATION (THE "NSCC"). (i) accept
and effectuate the registration and maintenance of accounts through
Networking and the purchase, redemption, transfer and exchange of shares
in such accounts through Fund/SERV (networking and Fund/SERV being
programs operated by the NSCC on behalf of NSCC's participants,
including the Fund), in accordance with, instructions transmitted to and
received by the Transfer Agent by transmission from NSCC on behalf of
broker-dealers and banks which have been established by, or in
accordance with the instructions of authorized persons, as hereinafter
defined on the dealer file maintained by the Transfer Agent; (ii) issue
instructions to Fund's banks for the settlement of transactions between
the Fund and NSCC (acting on behalf of its broker-dealer and bank
participants); (iii) provide account and transaction information from
the affected Fund's records on DST Systems, Inc. computer system TA2000
("TA2000 System") in accordance with NSCC's Networking and Fund/SERV
rules for those broker-dealers; and (iv) maintain Shareholder accounts
on TA2000 System through Networking.
(e) NEW PROCEDURES. New procedures as to who shall provide certain of
these services in Section 1 may be established in writing from time to
time by agreement between the Fund and the Transfer Agent. The Transfer
Agent may at times perform only a portion of these services and the Fund
or its agent may perform these services on the Fund's behalf.
3
<PAGE>
(f) ADDITIONAL TELEPHONE SUPPORT SERVICES. If the parties elect to have
the Transfer Agent provide additional telephone support services under
this Agreement, the parties will agree to such services, fees and
sub-contracting as stated in Schedule 1.2(f) entitled "Telephone Support
Services" attached hereto.
2. Third Party Administrators for Defined Contribution Plans
---------------------------------------------------------
2.1 The Fund may decide to make available to certain of its customers, a
qualified plan program (the "Program") pursuant to which the customers
("Employers") may adopt certain plans of deferred compensation ("Plan or
Plans") for the benefit of the individual Plan participant (the "Plan
Participant"), such Plan(s) being qualified under Section 401(a) of the
Internal Revenue Code of 1986, as amended ("Code") and administered by
third party administrators which may be plan administrators as defined
in the Employee Retirement Income Security Act of 1974, as amended)(the
"TPA(s)").
2.2 In accordance with the procedures established in the initial Schedule
2.1 entitled "Third Party Administrator Procedures", as may be amended
by the Transfer Agent and the Fund from time to time ("Schedule 2.1"),
the Transfer Agent shall:
(a) Treat Shareholder accounts established by the Plans in the name
of the Trustees, Plans or TPAs as the case may be as omnibus accounts;
(b) Maintain omnibus accounts on its records in the name of the TPA
or its designee as the Trustee for the benefit of the Plan; and
(c) Perform all services under SECTION 1 as transfer agent of the
Funds and not as a record-keeper for the Plans.
2.3 Transactions identified under SECTION 2 of this Agreement shall be
deemed exception services ("Exception Services") when such transactions:
(a) Require the Transfer Agent to use methods and procedures other
than those usually employed by the Transfer Agent to perform services
under Section 1 of this Agreement;
(b) Involve the provision of information to the Transfer Agent after
the commencement of the nightly processing cycle of the TA2000 System;
or
(c) Require more manual intervention by the Transfer Agent, either
in the entry of data or in the modification or amendment of reports
generated by the TA2000 System than is usually required by
non-retirement plan and pre-nightly transactions.
4
<PAGE>
3. Fees and Expenses
-----------------
3.1 FEE SCHEDULE. For the performance by the Transfer Agent pursuant to this
Agreement, the Fund agrees to pay the Transfer Agent an annual
maintenance fee for each Shareholder account as set forth in the
attached fee schedule ("Schedule 3.1"). Such fees and out-of-pocket
expenses and advances identified under SECTION 3.2 below may be changed
from time to time subject to mutual written agreement between the Fund
and the Transfer Agent.
3.2 OUT-OF-POCKET EXPENSES. In addition to the fee paid under SECTION 3.1
above, the Fund agrees to reimburse the Transfer Agent for out-of-pocket
expenses, including but not limited to confirmation production, postage,
forms, telephone, microfilm, microfiche, mailing and tabulating proxies,
records storage, or advances incurred by the Transfer Agent for the
items set out in Schedule 3.1 attached hereto. In addition, any other
expenses incurred by the Transfer Agent at the request or with the
consent of the Fund, will be reimbursed by the Fund.
3.3 POSTAGE. Postage for mailing of dividends, proxies, Fund reports and
other mailings to all shareholder accounts shall be advanced to the
Transfer Agent by the Fund at least seven (7) days prior to the mailing
date of such materials.
3.4 INVOICES. The Fund agrees to pay all fees and reimbursable expenses
within thirty (30) days following the receipt of the respective billing
notice, except for any fees or expenses which are subject to good faith
dispute. In the event of such a dispute, the Fund may only withhold that
portion of the fee or expense subject to the good faith dispute. The
Fund shall notify the Transfer Agent in writing within twenty-one (21)
calendar days following the receipt of each billing notice if the Fund
is disputing any amounts in good faith. If the Fund does not provide
such notice of dispute within the required time, the billing notice will
be deemed accepted by the Fund.
4. Representations and Warranties of the Transfer Agent
----------------------------------------------------
The Transfer Agent represents and warrants to the Fund that:
4.1 It is a trust company duly organized and existing and in good standing
under the laws of The Commonwealth of Massachusetts.
4.2 It is duly qualified to carry on its business in The Commonwealth
of Massachusetts.
4.3 It is empowered under applicable laws and by its Charter and By-Laws
to enter into and perform this Agreement.
4.4 All requisite corporate proceedings have been taken to authorize it
to enter into and perform this Agreement.
5
<PAGE>
4.5 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
5. Representations and Warranties of the Fund
------------------------------------------
The Fund represents and warrants to the Transfer Agent that:
5.1 It is a business trust duly organized and existing and in good standing
under the laws of .
5.2 It is empowered under applicable laws and by its Declaration of Trust
and By-Laws to enter into and perform this Agreement.
5.3 All corporate proceedings required by said Declaration of Trust and
By-Laws have been taken to authorize it to enter into and perform this
Agreement.
5.4 It is an open-end and diversified management investment company
registered under the Investment Company Act of 1940, as amended.
5.5 A registration statement under the Securities Act of 1933, as amended is
currently effective and will remain effective, and appropriate state
securities law filings have been made and will continue to be made, with
respect to all Shares of the Fund being offered for sale.
6. Wire Transfer Operating Guidelines/Articles 4A of the Uniform Commercial
------------------------------------------------------------------------
Code
----
6.1 The Transfer Agent is authorized to promptly debit the appropriate Fund
account(s) upon the receipt of a payment order in compliance with the
selected security procedure (the "Security Procedure") chosen for funds
transfer and in the amount of money that the Transfer Agent has been
instructed to transfer. The Transfer Agent shall execute payment orders
in compliance with the Security Procedure and with the Fund instructions
on the execution date provided that such payment order is received by
the customary deadline for processing such a request, unless the payment
order specifies a later time. All payment orders and communications
received after this the customary deadline will be deemed to have been
received the next business day.
6.2 The Fund acknowledges that the Security Procedure it has designated on
the Fund Selection Form was selected by the Fund from security
procedures offered by the Transfer Agent. The Fund shall restrict access
to confidential information relating to the Security Procedure to
authorized persons as communicated to the Transfer Agent in writing. The
Fund must notify the Transfer Agent immediately if it has reason to
6
<PAGE>
believe unauthorized persons may have obtained access to such
information or of any change in the Fund's authorized personnel. The
Transfer Agent shall verify the authenticity of all Fund instructions
according to the Security Procedure.
6.3 The Transfer Agent shall process all payment orders on the basis of the
account number contained in the payment order. In the event of a
discrepancy between any name indicated on the payment order and the
account number, the account number shall take precedence and govern.
6.4 The Transfer Agent reserves the right to decline to process or delay the
processing of a payment order which (a) is in excess of the collected
balance in the account to be charged at the time of the Transfer Agent's
receipt of such payment order; (b) if initiating such payment order
would cause the Transfer Agent, in the Transfer Agent's sole judgement,
to exceed any volume, aggregate dollar, network, time, credit or similar
limits which are applicable to the Transfer Agent; or (c) if the
Transfer Agent, in good faith, is unable to satisfy itself that the
transaction has been properly authorized.
6.5 The Transfer Agent shall use reasonable efforts to act on all authorized
requests to cancel or amend payment orders received in compliance with
the Security Procedure provided that such requests are received in a
timely manner affording the Transfer Agent reasonable opportunity to
act. However, the Transfer Agent assumes no liability if the request for
amendment or cancellation cannot be satisfied.
6.6 The Transfer Agent shall assume no responsibility for failure to detect
any erroneous payment order provided that the Transfer Agent complies
with the payment order instructions as received and the Transfer Agent
complies with the Security Procedure. The Security Procedure is
established for the purpose of authenticating payment orders only and
not for the detection of errors in payment orders.
6.7 The Transfer Agent shall assume no responsibility for lost interest with
respect to the refundable amount of any unauthorized payment order,
unless the Transfer Agent is notified of the unauthorized payment order
within thirty (30) days of notification by the Transfer Agent of the
acceptance of such payment order. In no event (including failure to
execute a payment order) shall the Transfer Agent be liable for special,
indirect or consequential damages, even if advised of the possibility of
such damages.
6.8 When the Fund initiates or receives Automated Clearing House credit and
debit entries pursuant to these guidelines and the rules of the National
Automated Clearing House Association and the New England Clearing House
Association, the Transfer Agent will act as an Originating Depository
Financial Institution and/or receiving depository Financial Institution,
as the case may be, with respect to such entries. Credits given by the
Transfer Agent with respect to an ACH credit entry are provisional until
the Transfer Agent receives final settlement for such entry from the
Federal Reserve Bank. If the Transfer Agent does not receive such final
settlement, the Fund agrees that the Transfer Agent shall receive a
7
<PAGE>
refund of the amount credited to the Fund in connection with such entry,
and the party making payment to the Fund via such entry shall not be
deemed to have paid the amount of the entry.
6.9 Confirmation of Transfer Agent's execution of payment orders shall
ordinarily be provided within twenty four (24) hours notice of which may
be delivered through the Transfer Agent's proprietary information
systems, or by facsimile or call-back. Fund must report any objections
to the execution of an order within thirty (30) days.
7. Data Access and Proprietary Information
---------------------------------------
7.1 The Fund acknowledges that the databases, computer programs, screen
formats, report formats, interactive design techniques, and
documentation manuals furnished to the Fund by the Transfer Agent as
part of the Fund's ability to access certain Fund-related data
("Customer Data") maintained by the Transfer Agent on databases under
the control and ownership of the Transfer Agent or other third party
("Data Access Services") constitute copyrighted, trade secret, or other
proprietary information (collectively, "Proprietary Information") of
substantial value to the Transfer Agent or other third party. In no
event shall Proprietary Information be deemed Customer Data. The Fund
agrees to treat all Proprietary Information as proprietary to the
Transfer Agent and further agrees that it shall not divulge any
Proprietary Information to any person or organization except as may be
provided hereunder. Without limiting the foregoing, the Fund agrees for
itself and its employees and agents to:
(a) Use such programs and databases (i) solely on the Fund's
computers, or (ii) solely from equipment at the location agreed to
between the Fund and the Transfer Agent and (iii) solely in accordance
with the Transfer Agent's applicable user documentation;
(b) Refrain from copying or duplicating in any way (other than in
the normal course of performing processing on the Fund's computer(s)),
the Proprietary Information;
(c) Refrain from obtaining unauthorized access to any portion of the
Proprietary Information, and if such access is inadvertently obtained,
to inform in a timely manner of such fact and dispose of such
information in accordance with the Transfer Agent's instructions;
(d) Refrain from causing or allowing information transmitted from
the Transfer Agent's computer to the Fund's terminal to be
retransmitted to any other computer terminal or other device except as
expressly permitted by the Transfer Agent (such permission not to be
unreasonably withheld);
(e) Allow the Fund to have access only to those authorized
transactions as agreed to between the Fund and the Transfer Agent; and
8
<PAGE>
(f) Honor all reasonable written requests made by the Transfer Agent
to protect at the Transfer Agent's expense the rights of the Transfer
Agent in Proprietary Information at common law, under federal copyright
law and under other federal or state law.
7.2 Proprietary Information shall not include all or any portion of any of
the foregoing items that: (i) are or become publicly available without
breach of this Agreement; (ii) are released for general disclosure by a
written release by the Transfer Agent; or (iii) are already in the
possession of the receiving party at the time or receipt without
obligation of confidentiality or breach of this Agreement.
7.3 The Fund acknowledges that its obligation to protect the Transfer
Agent's Proprietary Information is essential to the business interest of
the Transfer Agent and that the disclosure of such Proprietary
Information in breach of this Agreement would cause the Transfer Agent
immediate, substantial and irreparable harm, the value of which would be
extremely difficult to determine. Accordingly, the parties agree that,
in addition to any other remedies that may be available in law, equity,
or otherwise for the disclosure or use of the Proprietary Information in
breach of this Agreement, the Transfer Agent shall be entitled to seek
and obtain a temporary restraining order, injunctive relief, or other
equitable relief against the continuance of such breach.
7.4 If the Fund notifies the Transfer Agent that any of the Data Access
Services do not operate in material compliance with the most recently
issued user documentation for such services, the Transfer Agent shall
endeavor in a timely manner to correct such failure. Organizations from
which the Transfer Agent may obtain certain data included in the Data
Access Services are solely responsible for the contents of such data and
the Fund agrees to make no claim against the Transfer Agent arising out
of the contents of such third-party data, including, but not limited to,
the accuracy thereof. DATA ACCESS SERVICES AND ALL COMPUTER PROGRAMS AND
SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE PROVIDED ON AN
AS IS, AS AVAILABLE BASIS. THE TRANSFER AGENT EXPRESSLY DISCLAIMS ALL
WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT
LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
7.5 If the transactions available to the Fund include the ability to
originate electronic instructions to the Transfer Agent in order to: (i)
effect the transfer or movement of cash or Shares; or (ii) transmit
Shareholder information or other information, then in such event the
Transfer Agent shall be entitled to rely on the validity and
authenticity of such instruction without undertaking any further inquiry
as long as such instruction is undertaken in conformity with security
procedures established by the Transfer Agent from time to time.
9
<PAGE>
7.6 Each party shall take reasonable efforts to advise its employees of
their obligations pursuant to this SECTION 7. The obligations of this
Section shall survive any earlier termination of this Agreement.
8. Indemnification
---------------
8.1 The Transfer Agent shall not be responsible for, and the Fund shall
indemnify and hold the Transfer Agent harmless from and against, any and
all losses, damages, costs, charges, counsel fees, payments, expenses
and liability arising out of or attributable to:
(a) All actions of the Transfer Agent or its agents or
subcontractors required to be taken pursuant to this Agreement, provided
that such actions are taken in good faith and without negligence or
willful misconduct;
(b) The Fund's lack of good faith, negligence or willful misconduct;
(c) The reliance upon, and any subsequent use of or action taken or
omitted, by the Transfer Agent, or its agents or subcontractors on: (i)
any information, records, documents, data, stock certificates or
services, which are received by the Transfer Agent or its agents or
subcontractors by machine readable input, facsimile, CRT data entry,
electronic instructions or other similar means authorized by the Fund,
and which have been prepared, maintained or performed by the Fund or any
other person or firm on behalf of the Fund including but not limited to
any previous transfer agent or registrar; (ii) any instructions or
requests of the Fund or any of its officers; (iii) any instructions or
opinions of legal counsel with respect to any matter arising in
connection with the services to be performed by the Transfer Agent under
this Agreement which are provided to the Transfer Agent after
consultation with such legal counsel; or (iv) any paper or document,
reasonably believed to be genuine, authentic, or signed by the proper
person or persons;
(d) The offer or sale of Shares in violation of federal or state
securities laws or regulations requiring that such Shares be registered
or in violation of any stop order or other determination or ruling by
any federal or any state agency with respect to the offer or sale of
such Shares;
(e) The negotiation and processing of any checks including without
limitation for deposit into the Fund's demand deposit account maintained
by the Transfer Agent; or
(f) Upon the Fund's request entering into any agreements required by
the National Securities Clearing Corporation (the "NSCC") for the
transmission of Fund or Shareholder data through the NSCC clearing
systems.
8.2 In order that the indemnification provisions contained in this SECTION 8
shall apply, upon the assertion of a claim for which the Fund may be
10
<PAGE>
required to indemnify the Transfer Agent, the Transfer Agent shall
promptly notify the Fund of such assertion, and shall keep the Fund
advised with respect to all developments concerning such claim. The Fund
shall have the option to participate with the Transfer Agent in the
defense of such claim or to defend against said claim in its own name or
in the name of the Transfer Agent. The Transfer Agent shall in no case
confess any claim or make any compromise in any case in which the Fund
may be required to indemnify the Transfer Agent except with the Fund's
prior written consent.
9. Standard of Care
----------------
9.1 The Transfer Agent shall at all times act in good faith and agrees to
use its best efforts within reasonable limits to insure the accuracy of
all services performed under this Agreement, but assumes no
responsibility and shall not be liable for loss or damage due to errors
unless said errors are caused by its negligence, bad faith, or willful
misconduct or that of its employees, except as provided in SECTION 9.2
below.
9.2 In the case of Exception Services as defined in SECTION 2.3 herein, the
Transfer Agent shall be held to a standard of gross negligence and
encoding and payment processing errors shall not be deemed negligence.
10. Year 2000
---------
The Transfer Agent will take reasonable steps to ensure that its
products (and those of its third-party suppliers) reflect the available
technology to offer products that are Year 2000 ready, including, but
not limited to, century recognition of dates, calculations that
correctly compute same century and multi century formulas and date
values, and interface values that reflect the date issues arising
between now and the next one-hundred years, and if any changes are
required, the Transfer Agent will make the changes to its products at a
price to be agreed upon by the parties and in a commercially reasonable
time frame and will require third-party suppliers to do likewise.
11. Confidentiality
---------------
11.1 The Transfer Agent and the Fund agree that they will not, at any time
during the term of this Agreement or after its termination, reveal,
divulge, or make known to any person, firm, corporation or other
business organization, any customers' lists, trade secrets, cost figures
and projections, profit figures and projections, or any other secret or
confidential information whatsoever, whether of the Transfer Agent or of
the Fund, used or gained by the Transfer Agent or the Fund during
performance under this Agreement. The Fund and the Transfer Agent
further covenant and agree to retain all such knowledge and information
acquired during and after the term of this Agreement respecting such
lists, trade secrets, or any secret or confidential information
whatsoever in trust for the sole benefit of the Transfer Agent or the
Fund and their successors and assigns. In the event of breach of the
foregoing by either party, the remedies provided by SECTION 7.3 shall be
11
<PAGE>
available to the party whose confidential information is disclosed. The
above prohibition of disclosure shall not apply to the extent that the
Transfer Agent must disclose such data to its sub-contractor or Fund
agent for purposes of providing services under this Agreement.
11.2 In the event that any requests or demands are made for the inspection of
the Shareholder records of the Fund, other than request for records of
Shareholders pursuant to standard subpoenas from state or federal
government authorities (i.e., divorce and criminal actions), the
Transfer Agent will endeavor to notify the Fund and to secure
instructions from an authorized officer of the Fund as to such
inspection. The Transfer Agent expressly reserves the right, however, to
exhibit the Shareholder records to any person whenever it is advised by
counsel that it may be held liable for the failure to exhibit the
Shareholder records to such person or if required by law or court order.
12. Covenants of the Fund and the Transfer Agent
--------------------------------------------
12.1 The Fund shall promptly furnish to the Transfer Agent the following:
(a) A certified copy of the resolution of the Board of Trustees of
the Fund authorizing the appointment of the Transfer Agent and the
execution and delivery of this Agreement; and
(b) A copy of the Declaration of Trust and By-Laws of the Fund and
all amendments thereto.
12.2 The Transfer Agent hereby agrees to establish and maintain facilities
and procedures reasonably acceptable to the Fund for safekeeping of
stock certificates, check forms and facsimile signature imprinting
devices, if any; and for the preparation or use, and for keeping account
of, such certificates, forms and devices.
12.3 The Transfer Agent shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable. To
the extent required by Section 31 of the Investment Company Act of 1940,
as amended, and the Rules thereunder, the Transfer Agent agrees that all
such records prepared or maintained by the Transfer Agent relating to
the services to be performed by the Transfer Agent hereunder are the
property of the Fund and will be preserved, maintained and made
available in accordance with such Section and Rules, and will be
surrendered promptly to the Fund on and in accordance with its request.
12
<PAGE>
13. Termination of Agreement
------------------------
13.1 This Agreement may be terminated by either party upon one hundred twenty
(120) days' written notice to the other.
13.2 Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be
borne by the Fund. Additionally, the Transfer Agent reserves the right
to charge for any other reasonable expenses associated with such
termination and a charge equivalent to the average of three (3) months'
fees. Payment of such expenses or costs shall be in accordance with
SECTION 3.4 of this Agreement.
13.3 Upon termination of this Agreement, each party shall return to the other
party all copies of confidential or proprietary materials or information
received from such other party hereunder, other than materials or
information required to be retained by such party under applicable laws
or regulations.
14. Assignment and Third Party Beneficiaries.
-----------------------------------------
14.1 Except as provided in SECTION 15.1 below and the Additional Telephone
Support Services Schedule 1.2(f) attached, neither this Agreement nor
any rights or obligations hereunder may be assigned by either party
without the written consent of the other party. Any attempt to do so in
violation of this Section shall be void. Unless specifically stated to
the contrary in any written consent to an assignment, no assignment will
release or discharge the assignor from any duty or responsibility under
this Agreement.
14.2 Except as explicitly stated elsewhere in this Agreement, nothing under
this Agreement shall be construed to give any rights or benefits in this
Agreement to anyone other than the Transfer Agent and the Fund, and the
duties and responsibilities undertaken pursuant to this Agreement shall
be for the sole and exclusive benefit of the Transfer Agent and the
Fund. This Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and assigns.
14.3 This Agreement does not constitute an agreement for a partnership or
joint venture between the Transfer Agent and the Fund. Other than as
provided in SECTION 15.1 and Schedule 1.2(f), neither party shall make
any commitments with third parties that are binding on the other party
without the other party's prior written consent.
15. Subcontractors
15.1 The Transfer Agent may, without further consent on the part of the Fund,
subcontract for the performance hereof with (i) Boston Financial Data
Services, Inc., a Massachusetts corporation ("BFDS") which is duly
registered as a transfer agent pursuant to Section 17A(c)(2) of the
Securities Exchange Act of 1934, as amended, (ii) a BFDS subsidiary duly
registered as a transfer agent or (iii) a BFDS affiliate duly registered
as a transfer agent; provided, however, that the Transfer Agent shall be
13
<PAGE>
fully responsible to the Fund for the acts and omissions of BFDS or its
subsidiary or affiliate as it is for its own acts and omissions.
15.2 Nothing herein shall impose any duty upon the Transfer Agent in
connection with or make the Transfer Agent liable for the actions or
omissions to act of unaffiliated third parties such as by way of example
and not limitation, Airborne Services, Federal Express, United Parcel
Service, the U.S. Mails, the NSCC and telecommunication companies,
provided, if the Transfer Agent selected such company, the Transfer
Agent shall have exercised due care in selecting the same.
16. Miscellaneous
-------------
16.1 AMENDMENT. This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a
resolution of the Board of Trustees of the Fund.
16.2 MASSACHUSETTS LAW TO APPLY. This Agreement shall be construed and the
provisions thereof interpreted under and in accordance with the laws of
The Commonwealth of Massachusetts.
16.3 FORCE MAJEURE. In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God,
strikes, equipment or transmission failure or damage reasonably beyond
its control, or other causes reasonably beyond its control, such party
shall not be liable for damages to the other for any damages resulting
from such failure to perform or otherwise from such causes.
16.4 CONSEQUENTIAL DAMAGES. Neither party to this Agreement shall be liable
to the other party for consequential damages under any provision of this
Agreement or for any consequential damages arising out of any act or
failure to act hereunder.
16.5 SURVIVAL. All provisions regarding indemnification, warranty, liability,
and limits thereon, and confidentiality and/or protections of
proprietary rights and trade secrets shall survive the termination of
this Agreement.
16.6 SEVERABILITY. If any provision or provisions of this Agreement shall be
held invalid, unlawful, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be
affected or impaired.
16.7 PRIORITIES CLAUSE. In the event of any conflict, discrepancy or
ambiguity between the terms and conditions contained in this Agreement
and any Schedules or attachments hereto, the terms and conditions
contained in this Agreement shall take precedence.
16.8 WAIVER. No waiver by either party or any breach or default of any of the
covenants or conditions herein contained and performed by the other
party shall be construed as a waiver of any succeeding breach of the
same or of any other covenant or condition.
16.9 MERGER OF AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto and supersedes any prior agreement with
respect to the subject matter hereof whether oral or written.
14
<PAGE>
16.10 COUNTERPARTS. This Agreement may be executed by the parties hereto on
any number of counterparts, and all of said counterparts taken together
shall be deemed to constitute one and the same instrument.
16.11. REPRODUCTION OF DOCUMENTS. This Agreement and all schedules, exhibits,
attachments and amendments hereto may be reproduced by any photographic,
photostatic, microfilm, micro-card, miniature photographic or other
similar process. The parties hereto each agree that any such
reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding, whether or not the original
is in existence and whether or not such reproduction was made by a party
in the regular course of business, and that any enlargement, facsimile
or further reproduction shall likewise be admissible in evidence.
16.12 NOTICES. All notices and other communications as required or permitted
hereunder shall be in writing and sent by first class mail, postage
prepaid, addressed as follows or to such other address or addresses of
which the respective party shall have notified the other.
(a) If to State Street Bank and Trust Company, to:
State Street Bank and Trust Company
c/o Boston Financial Data Services, Inc.
Two Heritage Drive
Quincy, Massachusetts 02171
Attention: Legal Department
Facsimile: (617) 483-5850
(b) If to the Fund, to:
Attention:
17. Additional Funds
----------------
In the event that the Fund establishes one or more series of Shares in
addition to the attached Schedule A with respect to which it desires to
have the Transfer Agent render services as transfer agent under the
terms hereof, it shall so notify the Transfer Agent in writing, and if
the Transfer Agent agrees in writing to provide such services, such
series of Shares shall become a Portfolio hereunder.
18. Limitations of Liability of the Trustees and Shareholders
---------------------------------------------------------
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of The Commonwealth of Massachusetts, and notice is hereby
given that this instrument is executed on behalf of the Trustees of the
Trust as Trustees and not individually and that the obligations of this
instrument are not binding upon any of the Trustees or Shareholders
individually but are binding only upon the assets and property of the
Fund.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
BY: ___________________________________
ATTEST:
___________________________________
STATE STREET BANK AND TRUST COMPANY
BY: _______________________________
Vice Chairman
ATTEST:
<PAGE>
SCHEDULE A
[Fund List]
STATE STREET BANK AND TRUST COMPANY
BY:_________________________________ BY:_________________________________
<PAGE>
SCHEDULE 1.2(F)
ADDITIONAL TELEPHONE SUPPORT FEES AND SERVICES
Dated ____________
I. SERVICES
1. Transfer Agent and Telephone Support Functions
a. Answer telephone inquiries from [XXX 8 a.m. to 8 p.m. Boston time Monday
through Friday except Christmas Day XXX] [XXX OTHER HOLIDAY COVERAGE
AVAILABLE?XXX] from [XXX existing customers and prospective customers
XXX] of the Fund [XXX for sales literature XXX] in accordance with the
telephone script provided by the Fund.
b. Answer questions pertaining thereto the extent that such questions are
answerable based upon the information supplied to the Transfer Agent by
the Fund.
c. [XXX As the Fund and the Transfer Agent may agree in writing, the
Transfer Agent will receive calls and take written transaction requests
from shareholders of the Fund. Transfer Agent transactions include: [XXX
telephone redemptions, account maintenance, exchanges, transfers,
confirmed purchases, account balances and general inquiries XXX]. Some
transactions may result in research which will be done by the Fund.
Other calls may be referred directly to the Fund. Fax any referrals to
[XXX name of company XXX] on the same day the telephone call is received
XXX];
2. Incorporate new information into the above referenced script upon
written instructions from the Fund;
3. Maintain prospect detail information for six (6) months thereafter,
provide such information to the Fund in the form that the Fund may
reasonably request;
4. Send all literature orders for information from BFDS/DST [XXX [how?] [to
whom?] XXX] a minimum of [XXX one XXX] transmission per day;
5. Provide the Fund with a [XXX daily/weekly/monthly XXX] telephone report
detailing the calls received during the [XXX day/week/month XXX];
6. [XXX Provide the Fund with monthly conversion reports as selected by the
Fund from DST's standard report package. XXX]
7. TARGET SERVICE LEVELS: Average speed of answer is fifteen (15) seconds,
abandon rate of no more than 2%, and an overall service level of 85%.
The averages will be calculated on a weekly basis.
<PAGE>
II. SUBCONTRACTORS
1. The Transfer Agent may, without further consent on the part of the Fund,
subcontract ministerial telephone support services for the performance
hereof.
<PAGE>
III. FEES
STATE STREET BANK AND TRUST COMPANY
BY:_______________________________ BY:______________________________
<PAGE>
SCHEDULE 2.1
THIRD PARTY ADMINISTRATOR(S) PROCEDURES
Dated ____________
1. On each Business Day, the TPA(s) shall receive, on behalf of and as
agent of the Fund(s), Instructions (as hereinafter defined) from the
Plan. Instructions shall mean as to each Fund (i) orders by the Plan for
the purchases of Shares, and (ii) requests by the Plan for the
redemption of Shares; in each case based on the Plan's receipt of
purchase orders and redemption requests by Participants in proper form
by the time required by the term of the Plan, but not later than the
time of day at which the net asset value of a Fund is calculated, as
described from time to time in that Fund's prospectus. Each Business Day
on which the TPA receives Instructions shall be a "Trade Date".
2. The TPA(s) shall communicate the TPA(s)'s acceptance of such
Instructions, to the applicable Plan.
3. On the next succeeding Business Day following the Trade Date on which it
accepted Instructions for the purchase and redemption of Shares, (TD+1),
the TPA(s) shall notify the Transfer Agent of the net amount of such
purchases or redemptions, as the case may be, for each of the Plans. In
the case of net purchases by any Plan, the TPA(s) shall instruct the
Trustees of such Plan to transmit the aggregate purchase price for
Shares by wire transfer to the Transfer Agent on (TD+1). In the case of
net redemptions by any Plan, the TPA(s) shall instruct the Fund's
custodian to transmit the aggregate redemption proceeds for Shares by
wire transfer to the Trustees of such Plan on (TD+1). The times at which
such notification and transmission shall occur on (TD+1) shall be as
mutually agreed upon by each Fund, the TPA(s), and the Transfer Agent.
4. The TPA(s) shall maintain separate records for each Plan, which record
shall reflect Shares purchased and redeemed, including the date and
price for all transactions, and Share balances. The TPA(s) shall
maintain on behalf of each of the Plans a single master account with the
Transfer Agent and such account shall be in the name of that Plan, the
TPA(s), or the nominee of either thereof as the record owner of Shares
owned by such Plan.
5. The TPA(s) shall maintain records of all proceeds of redemptions of
Shares and all other distributions not reinvested in Shares.
6. The TPA(s) shall prepare, and transmit to each of the Plans, periodic
account statements showing the total number of Shares owned by that Plan
as of the statement closing date, purchases and redemptions of Shares by
the Plan during the period covered by the statement, and the dividends
and other distributions paid to the Plan on Shares during the statement
period (whether paid in cash or reinvested in Shares).
<PAGE>
7. The TPA(s) shall, at the request and expense of each Fund, transmit to
the Plans prospectuses, proxy materials, reports, and other information
provided by each Fund for delivery to its shareholders.
8. The TPA(s) shall, at the request of each Fund, prepare and transmit to
each Fund or any agent designated by it such periodic reports covering
Shares of each Plan as each Fund shall reasonably conclude are necessary
to enable the Fund to comply with state Blue Sky requirements.
9. The TPA(s) shall transmit to the Plans confirmation of purchase orders
and redemption requests placed by the Plans; and
10. The TPA(s) shall, with respect to Shares, maintain account balance
information for the Plan(s) and daily and monthly purchase summaries
expressed in Shares and dollar amounts.
11. Plan sponsors may request, or the law may require, that prospectuses,
proxy materials, periodic reports and other materials relating to each
Fund be furnished to Participants in which event the Transfer Agent or
each Fund shall mail or cause to be mailed such materials to
Participants. With respect to any such mailing, the TPA(s) shall, at the
request of the Transfer Agent or each Fund, provide at the TPA(s)'s
expense complete and accurate set of mailing labels with the name and
address of each Participant having an interest through the Plans in
Shares.
STATE STREET BANK AND TRUST COMPANY
BY:__________________________________ BY:________________________________
<PAGE>
SCHEDULE 3.1
FEES
Dated ____________
STATE STREET BANK AND TRUST COMPANY
BY:_________________________________ BY:_________________________________
KIRKPATRICK & LOCKHART LLP
1800 Massachusetts Avenue, N.W.
2nd Floor
Washington, D.C. 20036-1800
(202) 778-9000
www.kl.com
September 30, 1999
American Select Funds
4333 Amon Carter Boulevard, MD 5645
Fort Worth, Texas 76155
Ladies and Gentlemen:
You have requested our opinion, as counsel to American Select Funds (the
"Trust"), as to certain matters regarding the issuance of Shares of the Trust.
As used in this letter, the term "Shares" means the shares of beneficial
interest of the American Select Cash Reserve Fund, a series of the Trust.
As such counsel, we have examined certified or other copies, believed by
us to be genuine, of the Trust's Declaration of Trust and By-laws and such
resolutions and minutes of meetings of the Trust's Board of Trustees as we have
deemed relevant to our opinion, as set forth herein. Our opinion is limited to
the laws and facts in existence on the date hereof, and it is further limited to
the laws (other than the conflict of law rules) in the Commonwealth of
Massachusetts that in our experience are normally applicable to the issuance of
shares by unincorporated voluntary associations and to the Securities Act of
1933 ("1933 Act"), the Investment Company Act of 1940 ("1940 Act") and the
regulations of the Securities and Exchange Commission ("SEC") thereunder.
Based on present laws and facts, we are of the opinion that the issuance
of the Shares has been duly authorized by the Trust and that, when sold in
accordance with the terms contemplated by the Trust's Initial Registration
Statement on Form N-1A ("Registration Statement"), including receipt by the
Trust of full payment for the Shares and compliance with the 1933 Act and the
1940 Act, the Shares will have been validly issued, fully paid and
non-assessable.
We note, however, that the Trust is an entity of the type commonly known
as a "Massachusetts business trust." Under Massachusetts law, shareholders
could, under certain circumstances, be held personally liable for the
obligations of the Trust. The Declaration of Trust states that all persons
extending credit to, contracting with or having any claim against the Trust or
the Trustees shall look only to the assets of the Trust for payment under such
credit, contract or claim; and neither the Shareholders nor the Trustees, nor
any of their agents, whether past, present or future, shall be personally liable
therefor. It also requires that every note, bond, contract or other undertaking
issued by or on behalf of the Trust or the Trustees relating to the Trust shall
include a recitation limiting the obligation represented thereby to the Trust
and its assets. The Declaration of Trust further provides: (1) for
indemnification from the assets of the Trust for all loss and expense of any
shareholder held personally liable for the obligations of the Trust by virtue of
ownership of shares of the Trust; and (2) for the Trust to assume the defense of
any claim against the shareholder for any act or obligation of the Trust. Thus,
the risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Trust or series would be
<PAGE>
American Select Funds
September 30, 1999
Page 2
unable to meet its obligations.
We hereby consent to this opinion accompanying the Registration Statement
when it is filed with the SEC and to the reference to our firm in the
Registration Statement.
Very truly yours,
KIRKPATRICK & LOCKHART LLP
By /s/ Robert J. Zutz
---------------------
Robert J. Zutz
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Additional
Information" in the Prospectus of the American Select Cash Reserve Fund and to
the use of our report on the American Select Cash Reserve Fund dated September
27, 1999 in the Registration Statement (Form N-1A) of the American Select Funds
filed with the Securities and Exchange Commission in this initial Registration
Statement under the Securities Act of 1933 and Investment Company Act of 1940.
/s/ ERNST & YOUNG LLP
---------------------
ERNST & YOUNG LLP
Dallas, Texas
September 28, 1999
AMR Investments
September 27, 1999
American Select Funds
4333 Amon Carter Boulevard, MD 5645
Forth Worth, Texas 76155
Gentlemen:
We are writing in connection with 100,000 shares of beneficial interest of
the American Select Cash Reserve Fund, a series of the American Select Funds, a
Massachusetts business trust, that we have purchased from you at a price of
$1.00 per share. This is to advise you that the shares we have purchased were
purchased for investment only with no present intention of selling such shares,
and we do not now have any intention of selling such shares.
Very truly yours,
/s/ William F. Quinn
--------------------
William F. Quinn
President
4333 Amon Carter Blvd.
MD 5645
Fort Worth, TX 76155
817-967-3509
817-967-0768 FAX
