FILE NO. 2-27539
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 24, 2000
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
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Post-Effective Amendment No. 45 [ x ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 31 [ x ]
(Check appropriate box or boxes)
ARMSTRONG ASSOCIATES, INC.
(Exact Name of Registrant as Specified in Charter)
750 North St. Paul, LB 13, Suite 1300, Dallas, Texas 75201
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (214) 720-9101
C. K. Lawson
President
Armstrong Associates, Inc.
750 North St. Paul, LB 13
Suite 1300
Dallas, Texas 75201
(Name and Address for Agent for Service)
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Approximate Date of Proposed Public Offering:
It is proposed that this filing will become effective (check appropriate box)
[ x ] immediately upon filing [ ] on (date) pursuant
pursuant to paragraph (b) to paragraph (a)(i)
[ ] on (date) pursuant to [ ] 75 days after filing
paragraph (b) pursuant to paragraph (a)(ii)
[ ] 60 days after filing pursuant [ ] on October 28, 1999 pursuant to
to paragraph (a)(i) paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective admendment designates a new effective date for a
previously filed post-effective amendment
Title of Securities Being Registered..............Common Stock ($1.00 Par Value)
<PAGE>
The cross-reference sheet, Part A, Part B and Part C are incorporated by
reference from the Registrant's Post Effective Amendment No. 44 to the
Registration Statement on Form N-1A (File No. 2-27539) as filed with the
Securities and Exchange Commission on August 27, 1999.
<PAGE>
EXHIBIT INDEX
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(a) Restated Articles of Incorporation of the Fund filed October 28, 1983
[Exhibit 1.1, Form N-1A Post-Effective Amendment No. 27] - filed
electronically herewith
(b)(1) Bylaws of the Fund as amended through August 27, 1987 [Exhibit 2.1,
Form N-1A Post-Effective Amendment No. 31] filed electronically
herewith
(b)(2) Amendment to Bylaws of the Fund, effective August 25, 1993 [Exhibit
2.2, Form N-1A Post-Effective Amendment No. 37] filed electronically
herewith
(c) See Exhibit (a)
(d) Investment Advisory Agreement dated October 30, 1981 between the Fund
and Portfolios, Inc. [Exhibit 5.1, Form N-1A Post-Effective Amendment
No. 28] filed electronically herewith
(e) None
(f) None
(g) Custody Agreement dated September 9, 1994 between the Fund and The
Bank of California, N.A. [Exhibit 8.4, Form N-1A, Post-Effective
Amendment No. 39] filed electronically herewith
(h)(1) Amended and Restated Transfer Agent Agreement dated May 17, 1995
[Exhibit 8.5, Form N-1A Post Effective Amendment No. 40] filed
electronically herewith
(h)(2) Administrative Services Agreement dated October 24, 1985 between the
Fund and Portfolios, Inc. [Exhibit 9.1, Form N-1A Post-Effective
Amendment No. 30] filed electronically herewith
(i) Opinion of Jackson & Walker, L.L.P. as to legality of securities being
registered and related consent [Exhibit 10.1, Form N-1A Post-Effective
Amendment No. 43] filed electronically herewith
(j) Consent of Grant Thornton L.L.P [Filed Herewith] filed electronically
herewith
(k) Financial Data Schedule
(l) None
(m) None
(n) None
ARMSTRONG ASSOCIATES, INC.
RESTATED ARTICLES OF INCORPORATION
WITH AMENDMENDMENTS BY THE SHAREHOLDERS
1. Armstrong Associates, Inc., pursuant to the provisions of Article 4.07
of the Texas Business Corporation Act (hereinafter referred to as the "Act"),
hereby adopts Restated Articles of Incorporation which accurately copy the
Articles of Incorporation and all amendments and supplements thereto that are in
effect to date and as further amended by such Restated Articles of Incorporation
as hereinafter set forth, and which contain no other change in any provision
thereof.
2. The Articles of Incorporation of the Corporation are amended by the
Restated Articles of Incorporation as follows:
(a) Article V of the Articles of Incorporation is hereby amended to read as
follows:
"ARTICLE V.
"The aggregate number of shares of common stock which the Corporation
shall have the authority to issue is 6,000,000 shares of the par value of
$1.00 per share."
(b) Article VIII of the Articles of Incorporation is hereby amended to read
as follows:
"ARTICLE VIII.
"Prior to commencing business the Corporation complied with all of the
capital stock requirements therefor, as provided in the corporation laws of
Texas."
(c) Article IX of the Articles of Incorporation is hereby amended to read
as follows:
<PAGE>
"ARTICLE IX.
"The Corporation shall redeem any shares of the common stock of the
Corporation duly tendered for redemption, each redemption to be effected at
the net asset value per share of the tendered shares and on the terms and
conditions set forth below:
"1. The redemption shall be effected in accordance with procedures
from time to time adopted by the Board of Directors, in conformity with the
Investment Company Act of 1940, for determining, among other things, (a)
the net asset value per share of the shares, (b) the times as of which (i)
the shares shall be deemed duly tendered for redemption, (ii) the net asset
value of the shares shall be determined and (iii) the redemption price
shall be paid, (d) the requirements for a due tender of shares and related
documentation, and (e) such other matters that may arise in connection
therewith.
"2. Except as hereinafter provided, the redemption price shall be paid
in cash or by check on current funds. Redemption may be made in whole or in
part in securities or other assets of the Corporation in the event of the
closing of the New York Stock Exchange or the happening of any event at any
time prior to actual payment which makes the liquidation of securities or
other assets of the Corporation in orderly fashion impracticable or
impossible, or if the Board of Directors shall determine that payment in
cash would be prejudicial to the best interests of the remaining
stockholders of the Corporation. In making any such payments in whole or in
part in securities or other assets of the Corporation, the Board of
Directors shall have the authority to select and value the particular
securities or other assets to be paid to a stockholder and to otherwise
decide what is fair and practicable in making such payment. Delivery of the
securities included in any such payment shall be made as promptly as any
necessary transfers may be made on the books of the several corporations
whose securities are to be delivered.
"3. The redemption price may be paid out of stated capital or any
unrestricted surplus, but redemption is conditional upon the Corporation
having funds or property legally available therefor.
"4. From and after the close of business on the day when the shares
are properly tendered for redemption the owner shall, with respect to such
shares, cease to be a stockholder of the Corporation and shall have only
the right to receive the redemption price, in accordance with the
provisions hereof."
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<PAGE>
(d) Article XI of the Articles of Incorporation is hereby amended to read
as follows:
"ARTICLE XI.
"The vote or concurrence of the holders of a majority of the
outstanding shares of the Corporation shall be required for the following,
stockholder actions, to wit: any amendment to or restatement of the
Articles of Incorporation; any merger or consolidation; any sale, lease,
exchange or other disposition of all, or substantially all, of the property
or assets of the Corporation; or the dissolution of the Corporation. The
foregoing shall control over any requirement in the Texas Business
Corporation Act (the "Act") for the vote or concurrence of the holders of a
greater number of shares with respect to such actions to the extent
permitted by the Act, but shall not require the vote or concurrence of such
number of shares where a lesser vote is specified in the Act and shall not
require approval by the stockholders of any action for which the Act does
not require stockholder vote or concurrence."
(e) Article XII of the Articles of Incorporation is hereby amended to read
as follows:
"ARTICLE XII.
"The post office address of the registered office of the Corporation
is 311 N. Market Street, Suite 205, Dallas, Texas and the name of its
registered agent at such address is C. K. Lawson."
(f) Article XIII of the Articles of Incorporation is hereby amended to read
as follows:
"ARTICLE XIII.
"The number of directors of the Corporation shall be not less than
three nor more than ten as the stockholders may, from time to time
determine. The number of directors constituting the present Board of
Directors is six (6) and the names and addresses of the persons who are to
serve as directors until the next meeting of stockholders are:
Eugene P. Frenkel, M.D.
C. K. Lawson
Douglas W. Maclay
R. H. Stewart Mitchell, Jr.
Cruger S. Ragland
Ann D. Reed"
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<PAGE>
(g) Article XIV of the Articles of Incorporation is hereby deleted in its
entirety.
3. Each such amendment made by these Restated Articles of Incorporation has
been effected in conformity with the provisions of the Act and such Restated
Articles of Incorporation and each such amendment made by the Restated Articles
of Incorporation was duly adopted by the shareholders of the Corporation on
October 27, 1983.
4. The number of shares outstanding was 1,266,131; the number of shares
entitled to vote on the Restated Articles of Incorporation as so amended was
1,266,131; the number of shares voted for such Restated Articles of
Incorporation as so amended was 929,726; and the number of shares voted against
such Restated Articles of Incorporation as so amended was 2,497.
5. The Articles of Incorporation and all amendments and supplements thereto
are hereby superseded by the following Restated Articles of Incorporation which
accurately copy the Articles of Incorporation and all amendments and supplements
thereto that are in effect to date and as amended as set forth above, and the
Restated articles of Incorporation which follow contain no other change in any
provision thereof.
RESTATED ARTICLES OF INCORPORATION
OF
ARMSTRONG ASSOCIATES, INC.
ARTICLE I.
The name of this Corporation is ARMSTRONG ASSOCIATES, INC.
ARTICLE II.
The period of the Corporation's duration is perpetual.
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<PAGE>
ARTICLE III.
The purpose or purposes for which the Corporation is organized are:
1. To conduct and carry on the business of a diversified, open-end
management investment company.
2. To invest and reinvest the property and assets of the Corporation in
securities of different types and classes, including without limitation, stocks,
bonds, notes, debentures, and certificates of interest or participation, and in
other personal property, but without banking and discounting privileges.
3. To purchase, retire, redeem, hold, sell, reissue, transfer, and
otherwise deal in, shares of its own capital stock; and to apply to such
purchase, retirement, or acquisition any funds or property of the Corporation,
whether capital or surplus or otherwise, as may be permitted by law.
4. To exercise as owner of any securities all rights, powers and privileges
in respect thereof and to do any and all acts and things for the preservation,
protection and enhancement in value of all such securities.
ARTICLE IV.
1. At least seventy-five per centum (75%) of the value of the Corporation's
total assets shall be represented by cash and cash items (including
receivables), Government securities and other securities for the purpose of this
calculation limited in respect of any one issuer to an amount not greater in
value than five per centum (5%) of the value of the total assets of the
Corporation (such total assets to be determined by or in the manner authorized
by the Board of Directors) and to not more than ten per centum (10%) of the
outstanding- voting securities of such issuer.
2. The Corporation shall not purchase any security on margin except such
short term credits as are necessary for the clearance of transactions, nor
participate on a joint or a joint and several basis in any trading account in
securities nor effect a short sale of any security.
3. The Corporation shall not borrow any money unless immediately after any
such borrowing there is an asset coverage (as defined in the Investment Company
Act of 1940) of at least 300% for all borrowings of the Corporation; and
provided, further, that in the event that such asset coverage shall at any time
fall below 300% the Corporation shall, within three days thereafter (not
including Sundays and holidays) or such longer time as the Securities and
Exchange Commission may prescribe by rules and regulations, reduce the amount of
its borrowings to an extent that the asset coverage of such borrowings shall be
at least 300%.
4. The Corporation shall not purchase any commodities or commodity
contracts or real estate except for its own use in connection with its business
and shall not underwrite securities issued by other persons or issue "senior
securities" as that term is defined in the Investment Company Act of 1940.
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<PAGE>
5. The Corporation shall not lend any of its cash funds or other assets to
any person, firm or corporation except through the purchase of bonds,
debentures, notes or other evidence of indebtedness as herein authorized.
ARTICLE V.
The aggregate number of shares of common stock which the Corporation shall
have the authority to issue is 6,000,000 shares of the par value of $1.00 per
share.
ARTICLE VI.
No stockholder of this Corporation shall by reason of his holding shares of
any class of stock of this Corporation have any preemptive or preferential right
to purchase or subscribe for any shares of common stock or other securities
issued by this Corporation, whether now or hereafter authorized.
ARTICLE VII.
Cumulative voting in any election of Directors of the Corporation is
prohibited.
ARTICLE VIII.
Prior to commencing business the Corporation complied with all of the
capital stock requirements therefor, as provided in the corporation laws of
Texas.
ARTICLE IX.
The Corporation shall redeem any shares of the common stock of the
Corporation duly tendered for redemption, each redemption to be effected at the
net asset value per share of the tendered shares and on the terms and conditions
set forth below:
1. The redemption shall be effected in accordance with procedures from time
to time adopted by the Board of Directors, in conformity with the Investment
Company Act of 1940, for determining, among other things, (a) the net asset
value per share of the shares, (b) the times as of which (i) the shares shall be
deemed duly tendered for redemption, (ii) the net asset value of the shares
shall be determined and (iii) the redemption price shall be paid, (d) the
requirements for a due tender of shares and related documentation, and (e) such
other matters that may arise in connection therewith.
2. Except as hereinafter provided, the redemption price shall be paid in
cash or by check on current funds. Redemption may be made in whole or in part in
securities or other assets of the Corporation in the event of the closing of the
New York Stock Exchange or the happening of any event at any time prior to
actual payment which makes the liquidation of securities or other assets of the
Corporation in orderly fashion impracticable or impossible, or if the Board of
Directors shall determine that payment in cash would be prejudicial to the best
interests of the remaining stockholders of the Corporation. In making any such
payments in whole or
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<PAGE>
in part in securities or other assets of the Corporation, the Board of Directors
shall have the authority to select and value the particular securities or other
assets to be paid to a stockholder and to otherwise decide what is fair and
practicable in making such payment. Delivery of the securities included in any
such payment shall be made as promptly as any necessary transfers may be made on
the books of the several corporations whose securities are to be delivered.
3. The redemption price may be paid out of stated capital or any
unrestricted surplus, but redemption is conditional upon the Corporation having
funds or property legally available therefor.
4. From and after the close of business on the day when the shares are
properly tendered for redemption the owner shall, with respect to such shares,
cease to be a stockholder of the Corporation and shall have only the right to
receive the redemption price, in accordance with the provisions hereof.
ARTICLE X.
The Corporation may from time to time sell shares of its common stock for a
consideration per share equal to the net asset value per share of such stock
determined as hereinabove provided. The Board of Directors shall determine the
time of such sales, the time of determining net asset value in connection
therewith and all other matters pertaining to such sales.
ARTICLE XI.
The vote or concurrence of the holders of a majority of the outstanding
shares of the Corporation shall be required for the following stockholder
actions, to wit: any amendment to or restatement of the Articles of
Incorporation; any merger or consolidation; any sale, lease, exchange or other
disposition of all, or substantially all, of the property or assets of the
Corporation; or the dissolution of the Corporation. The foregoing shall control
over any requirement in the Texas Business Corporation Act (the "Act") for the
vote or concurrence of the holders of a greater number of shares with respect to
such actions to the extent permitted by the Act, but shall not require the vote
or concurrence of such number of shares where a lesser vote is specified in the
Act and shall not require approval by the stockholders of any action for which
the Act does not require stockholder vote or concurrence.
ARTICLE XII.
The post office address of the registered office of the Corporation is 311
N. Market Street, Suite 205, Dallas, Texas and the name of its registered agent
at such address is C. K. Lawson.
ARTICLE XIII.
The number of directors of the Corporation shall be not less than three nor
more than ten as the stockholders may, from time to time determine. The number
of directors constituting the present Board of Directors is six (6) and the
names and
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<PAGE>
addresses of the persons who are to serve as directors until the next meeting of
stockholders are:
Eugene P. Frenkel, M.D.
C. K. Lawson
Douglas W. Maclay
R. H. Stewart Mitchell, Jr.
Cruger S. Ragland
Ann D. Reed
Dated October 27, 1983
ARMSTRONG ASSOCIATES, INC.
By /s/ C.K. Lawson
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Its President
And /s/ Candace L. King
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Its Secretary
THE STATE OF TEXAS
COUNTY OF DALLAS
This instrument was acknowledged before me on this the 27th day of October,
1983 by C. K. Lawson, President of Armstrong Associates, Inc., a Texas
corporation, on behalf of said corporation.
[N.S] /s/ Joyce Yancey
----------------------------------
Notary Public, State of Texas
My commission expires:
November 3, 1986
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AS AMENDED THROUGH AUGUST 27, 1987
BYLAWS
OF
ARMSTRONG ASSOCIATES, INC.
--------------------------
As Amended through August 27, 1987
ARTICLE I. OFFICES
The registered office of the Corporation in the State of Texas shall be
located in the City of Dallas, County of Dallas. The Corporation may have such
other offices, either within or without the State of Texas, as the Board of
Directors may designate or as the business of the Corporation may require from
time to time.
ARTICLE II. SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders for the
purpose of electing Directors and for the transaction of such other business as
may come before the meeting shall be held each year within six months after the
end of the fiscal year of the Corporation on a day selected by the President or
Secretary of the Corporation and shown in the notice of the meeting; PROVIDED,
HOWEVER, that the Board of Directors may in any year schedule the holding of
that year's annual meeting for a later time if in their judgment such scheduling
is in the best interests of the Corporation and not contrary to law. If the
election of Directors shall not be held at any annual meeting of the
shareholders, or at any adjournment thereof, the Board of Directors shall cause
the election of Directors to be held at a special meeting of the shareholders as
soon thereafter as convenient.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders, for any
purpose or purposes may be called by the President, by the Board of Directors or
by the holders of at least ten (10%) of all shares entitled to vote at the
proposed special meeting.
SECTION 3. PLACE OF MEETINGS. Meetings of the shareholders for the election
of directors and all other purposes shall be held in the offices of the
Corporation in the City of Dallas, State of Texas, or at such other place,
within or without the State of Texas, that shall be specified in the notice of
the meeting.
SECTION 4. NOTICE OF MEETINGS. Written or printed notice stating the place,
day and hour of the meeting and, in case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than ten
(10) nor more than sixty (60) days before the date of the meeting either
personally or by mail, by or at the direction of the President, or the
Secretary, or the officer or persons calling the meeting, to each shareholder of
record entitled to vote at such meeting. If mailed, such notice shall be deemed
to be delivered when deposited in the United
<PAGE>
States mail, addressed to the shareholder at his address as it appears on the
stock transfer books of the Corporation, with postage thereon prepaid.
SECTION 5. BUSINESS TO BE CONDUCTED AT SPECIAL MEETING. Business transacted
at any special meeting shall be confined to the purposes stated in the notice
thereof.
SECTION 6. RECORD DATE; CLOSING OF TRANSFER BOOKS. The Board of Directors
may fix in advance a record date for the purpose of determining shareholders
entitled to notice of or to vote at a meeting of the shareholders, the record
date to be not less than ten (10) nor more than sixty (60) days prior to the
meeting; or the Board of Directors may close the stock transfer books for such
purpose for a period of not less than ten (10) nor more than sixty (60) days
prior to such meeting. In the absence of any action by the Board of Directors,
the date upon which the notice of the meeting is mailed shall be the record
date. When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such determination shall
apply to any adjournment thereof except where the determination has been made
through the closing of stock transfer books and the stated period of closing has
expired.
SECTION 7. VOTING LISTS. The officer or agent having charge of the stock
transfer books for shares of the Corporation shall make, at least ten (10) days
before such meeting of shareholders, a complete list of the shareholders
entitled to vote at such meeting or any adjournment thereof, arranged in
alphabetical order, with the address of and the number of shares held by each,
which list, for a period of ten (10) days prior to such meeting, shall be kept
on file at the registered office of the Corporation and shall be subject to
inspection by any shareholder at any time during usual business hours. Such list
shall also be produced and kept open at the time and place of the meeting and
shall be subject to the inspection of any shareholder during the whole time of
the meeting. The original stock transfer book shall be prima facie evidence as
to who are the shareholders entitled to examine such list or transfer books or
to vote at any meeting of the shareholders.
SECTION 8. QUORUM. The holders of a majority of the outstanding shares of
the Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a quorum are
represented at a meeting, a majority of the shareholders present in person or
represented by proxy may adjourn the meeting from time to time without further
notice until a quorum shall be present or represented. At such adjourned meeting
at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. The shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
SECTION 9. MAJORITY MAY TRANSACT BUSINESS. The vote of the holders of a
majority of the shares entitled to vote and thus represented at a meeting at
which a quorum is present shall be the act of the shareholders' meeting, unless
the vote of a greater number is required by law or the articles of
incorporation.
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<PAGE>
SECTION 10. PROXIES. A shareholder may vote in person or by proxy duly
executed in writing by the shareholder or by his duly authorized
attorney-in-fact. No proxy shall be valid after eleven (11) months from the date
of its execution unless otherwise provided in the proxy. Each proxy shall be
revocable before it has been voted unless the proxy form conspicuously states
that the proxy is irrevocable and the proxy is coupled with an interest,
including the appointment as proxy of (a) a pledgee, (b) a person who purchased
or agreed to purchase, or owns or holds an option to purchase, the shares, (c) a
creditor of the Corporation who extended its credit under terms requiring the
appointment, (d) an employee of the Corporation whose employment contract
requires the appointment or (e) a party to a voting agreement created under the
Texas Business Corporation Act. A revocable proxy shall be deemed to have been
revoked if the Secretary of the Corporation shall have received at or before the
meeting instructions of revocation or a proxy bearing a later date, which
instructions or proxy shall have been duly executed and dated in writing by the
shareholder.
SECTION 11. VOTING OF SHARES. Each outstanding share entitled to vote shall
be entitled to one vote upon each matter submitted to a vote at a meeting of
shareholders. At each election for directors every shareholder entitled to vote
at such election shall have the right to vote, in person or by proxy, the number
of shares owned by him for as many persons as there are directors to be elected
and for whose election he has a right to vote, and stockholders of the
Corporation are expressly prohibited from cumulating their votes in any election
for directors of the Corporation.
SECTION 12. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the
name of another corporation may be voted by such officer, agent or proxy as the
bylaws of such corporation may prescribe or, in the absence of such provision,
as the Board of Directors of such corporation may determine.
Shares held by an administrator, executor, guardian or conservator may be
voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name as trustee.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name if authority so to do be
contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to the Corporation or held by it in a
fiduciary capacity shall not be voted, directly or indirectly, at any meeting,
and shall not be counted in determining the total number of outstanding shares
at any given time.
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<PAGE>
SECTION 13. INFORMAL ACTION BY SHAREHOLDERS. Any action required to be
taken at a meeting of the shareholders, or any action which may be taken at a
meeting of the shareholders, may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all of the
shareholders entitled to vote with respect to the subject matter thereof and
such consent shall have the same force and effect as a unanimous vote of
shareholders.
ARTICLE III. BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of the Corporation
shall be managed by its Board of Directors which may exercise all such powers of
the Corporation and do all such lawful acts and things as are not by statute or
by the Articles of Incorporation or by these by-laws directed or required to be
exercised and done by the shareholders.
SECTION 2. NUMBER, QUALIFICATIONS AND TENURE. The number of Directors of
the Corporation shall be determined by the shareholders (by resolution or
election) from time to time, but in no event shall the number be fixed at less
than three or shall any decrease in the number of directors have the effect of
shortening the term of any incumbent Director. Directors need not be residents
of the State of Texas or shareholders of the Corporation. Unless removed in
accordance with these bylaws, each Director shall hold office until the next
succeeding annual meeting of shareholders and until his successor shall have
been elected and qualified. Any Director may be removed from his position as
Director, either with or without cause, at any meeting of shareholders called
expressly for that purpose by a vote of the holders of a majority of the shares
then entitled to vote at an election of Directors. Any Director may resign at
any time by giving written notice to the President or Secretary of the
Corporation, and the resignation shall take effect, without any acceptance
thereof on behalf of the Corporation, on the later of (a) the date specified
therein or (b) the date on which the written resignation is actually received by
the President or the Secretary of the Corporation.
SECTION 3. REGULAR MEETINGS. A regular meeting of the Board of Directors
shall be held without other notice than by this bylaw immediately after, and at
the same place as, the annual meeting of shareholders. The Board of Directors
may provide, by resolution, the time and place for the holding of additional
regular meetings without notice other than such resolution.
SECTION 4. SPECIAL MEETINGS. Special meetings of the Board of Directors may
be called by or at the request of the President and shall be called by the
Secretary on the written request of any two Directors. The person or persons
authorized to call special meetings of the Board of Directors may fix the place
for holding any special meeting of the Board of Directors called by them. Notice
of any special meeting shall be given at least one (1) day previously thereto by
written notice delivered personally or mailed to each Director at his business
or residence address, or by telegram. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the Board of Directors
need be specified in the notice or waiver of notice of such meeting. If mailed,
such notice shall be deemed to be delivered when deposited in the United States
mail so addressed, with postage thereon prepaid. If notice be given by telegram,
such notice shall be deemed to be delivered when
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<PAGE>
the telegram is delivered to the telegraph company. Any Director may waive
notice of any meeting. The attendance of a Director at a meeting shall
constitute a waiver of notice of such meeting, except where a Director attends a
meeting for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened.
SECTION 5. PLACE OF MEETINGS. Meetings of the Board of Directors, regular
or special, may be held either within or without the State of Texas.
SECTION 6. QUORUM. A majority of the number of Directors fixed in
accordance with Section 2 of this Article III shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors, but if less
than such majority is present at a meeting, a majority of the Directors present
may adjourn the meeting from time to time, without further notice, until a
quorum shall be present.
SECTION 7. MANNER OF ACTING. The act of the majority of the Directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors unless a greater number is required by law or by the Articles of
Incorporation.
SECTION 8. VACANCIES. Any vacancy occurring in the Board of Directors (by
death, resignation, retirement, disqualification, removal from office or
otherwise than an increase in the number of directors) may be filled by the
affirmative vote of not less than a majority of the directors then in office,
even if less than a quorum, and any director so chosen, unless sooner displaced,
shall hold office until the next annual election of directors and until his
successor shall have been duly elected and qualified; PROVIDED that immediately
after the filling of any such vacancy at least two-thirds of the directors then
holding office shall have been elected to such office by the shareholders of the
Corporation at an annual meeting or a special meeting called for that purpose.
In the event that at any time less than a majority of the directors of the
Corporation holding office at the time were elected by the holders of shares of
the Corporation entitled to vote in the election of directors, the Board of
Directors or the President of the Corporation shall forthwith cause to be held
as promptly as possible and, in any event, within sixty (60) days a meeting of
the shareholders for the purpose of electing directors to fill any existing
vacancies in the Board of Directors.
SECTION 9. PRESUMPTION OF ASSENT. A Director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent shall be entered into the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as the secretary
of the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the Corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a Director
who voted in favor of such action.
SECTION 10. COMMITTEES OF DIRECTORS. The Board of Directors, by resolution
adopted by a majority of the whole Board, may designate from among its members
an Executive Committee and one or more other committees, each of which, to the
extent provided in such resolution, shall have and may exercise all of the
authority of the Board of Directors, except where the action of the Board is
required
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by statute. The designation of any such committee and the delegation thereto of
authority shall not operate to relieve the Board of Directors, or any member
thereof, of any responsibility imposed by law. In like manner, the Board of
Directors may designate from among its members one or more other committees,
including an Audit Committee, which shall have and may exercise such authority
of the Board of Directors as may be properly provided in such resolution.
SECTION 11. COMPENSATION OF DIRECTORS. Directors, as such, shall not
receive any stated salary for their services, but, by resolution of the Board a
fixed sum and expenses of attendance, if any, may be allowed for attendance at
each regular or special meeting of the Board; PROVIDED that nothing herein
contained shall be construed to preclude any Director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
SECTION 12. ACTIONS WITHOUT A MEETING; TELEPHONE MEETINGS. Any action
required or permitted to be taken at a meeting of the Board of Directors or any
committee may be taken without a meeting if a consent in writing, setting forth
the action so taken, is signed by all of the members of the Board of Directors
or committee, as the case may be; and such consent shall have the same force and
effect as a unanimous vote at a meeting. Subject to the provisions set forth
elsewhere in these bylaws for notice of meetings, members of the Board of
Directors or any committee may participate in and hold a meeting of the Board or
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Section shall constitute
presence in person at such meeting, except where a person participates in the
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened.
ARTICLE IV. NOTICES
SECTION I. FORM; DELIVERY. Notices to Directors and shareholders shall be
in writing and delivered personally or mailed to the Directors or shareholders
at their addresses appearing on the books of the Corporation. Notice by mail
shall be deemed to be given at the time when same shall be mailed. Notice to
Directors may also be given by telegram.
SECTION 2. WAIVER. Whenever any notice is required to be given to any
shareholder or Director under the provisions of the statutes or of the articles
of incorporation or of these by-laws, a waiver thereof in writing signed by the
person or persons entitled to such notice, whether before or after the time
stated therein, shall be equivalent to the giving of such notice.
SECTION 3. EFFECT OF ATTENDANCE. Attendance of a Director at a meeting
shall constitute a waiver of notice of such meeting, except where a Director
attends a meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting is not lawfully called or convened.
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ARTICLE V. OFFICERS
SECTION 1. NUMBER. The officers of the Corporation shall consist of a
president and a secretary, each of whom shall be elected by the Board of
Directors. The Board of Directors may also elect one or more vice presidents
(the number and categories thereof to be determined by the Board of Directors)
and a treasurer. Any two or more offices may be held by the same person.
SECTION 2. TIME OF ELECTION. The Board of Directors at its first meeting
after each annual meeting of shareholders shall choose a president, a secretary
and such additional officers that it deems appropriate, none of whom need be a
member of the Board.
SECTION 3. ADDITIONAL OFFICES. Such other officers and assistant officers
and agents as may be deemed appropriate may be elected or appointed by the Board
of Directors.
SECTION 4. SALARIES. The salaries, if any, of all officers and agents of
the Corporation shall be fixed by the Board of Directors.
SECTION 5. TERM. The officers of the Corporation shall hold office until
their successors are chosen and qualify. Any officer or agent or member of the
executive committee elected or appointed by the Board of Directors may be
removed by the Board of Directors whenever in its judgment the best interests of
the Corporation will be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed. Any vacancy
occurring in any office of the Corporation by death, resignation, removal or
otherwise shall be filled by the Board of Directors.
SECTION 6. THE PRESIDENT. The president shall be the chief executive
officer of the Corporation, shall preside at all meetings of the shareholders
and the Board of Directors, shall see that all orders and resolutions of the
Board of Directors are carried into effect, and, subject to the control of the
Board of Directors, shall have general and active management of the business of
the Corporation. He shall execute contracts in the name of the Corporation
except where the signing and execution thereof shall be expressly delegated by
the Board of Directors to some other officer or officers or agent or agents of
the Corporation.
SECTION 7. THE VICE PRESIDENTS. The vice presidents in the order of their
seniority, unless otherwise determined by the Board of Directors, shall, in the
absence or disability of the president, perform the duties and exercise the
powers of the president. They shall perform such other duties and have such
other powers as the Board of Directors shall prescribe.
SECTION 8. THE SECRETARY. The secretary shall attend all meetings of the
Board of Directors and all meetings of the shareholders and record all the
proceedings of the meetings of the Corporation and of the Board of Directors in
one or more books to be kept for that purpose and shall perform like duties for
the standing committees when required. He shall give, or cause to be given,
notice of all meetings of the shareholders and special meetings of the Board of
Directors, and shall perform such
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other duties as may be prescribed by the Board of Directors or president, under
whose supervision he shall be.
SECTION 9. The ASSISTANT SECRETARIES. The assistant secretaries, if any, in
the order of their seniority, unless otherwise determined by the Board of
Directors, shall, in the absence or disability of the secretary, perform the
duties and exercise the powers of the secretary. They shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe.
SECTION 10. THE TREASURER. The treasurer shall be responsible for the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. He shall render to the president and the Board of Directors at its
regular meetings or when the Board of Directors so requires an account of all
his transactions as treasurer and of the finance condition of the Corporation.
If required by the Board of Directors, he shall give the Corporation a bond in
such sum and with such surety or sureties as shall be satisfactory to the Board
of Directors for the faithful performance of the duties of his office and for
the restoration to the Corporation, in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control belonging
to the Corporation.
SECTION 11. THE ASSISTANT TREASURERS. The assistant treasurers, if any, in
the order of their seniority, unless otherwise determined by the Board of
Directors, shall, in the absence or disability of the treasurer, perform the
duties and exercise the powers of the treasurer. They shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe.
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares of the
Corporation outstanding shall be signed by the president or a vice president,
and the secretary or an assistant secretary of the Corporation, and may be
sealed with the seal of the Corporation or a facsimile thereof. No certificate
shall be issued for any share until the consideration therefor has been fully
paid. Each certificate representing shares shall state upon the face thereof
that the Corporation is organized under the laws of the State of Texas, the name
of the person to whom issued, the number and class and the designation of the
series, if any, which said certificate represents, and the par value of each
share represented by such certificate or a statement that the shares are without
par value.
SECTION 2. FACSIMILE SIGNATURES. The signatures of the president or vice
president and the secretary or assistant secretary upon a certificate may be
facsimiles, if the certificate is countersigned by a transfer agent, or
registered by a registrar, other than the Corporation itself or an employee of
the Corporation. In case any officer who has signed or whose facsimile signature
has been placed upon such certificate shall have ceased to be such officer
before such certificate is issued, it may be issued by the corporation with the
same effect as if he were such officer at the date of the issuance.
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SECTION 3. LOST CERTIFICATES. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost or destroyed. When authorizing such issue of
a new certificate or certificates, the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate alleged
to have been lost or destroyed.
SECTION 4. TRANSFERS OF STOCK. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, with signatures guaranteed as required by the Board of Directors, and
accompanied by proper payment of transfer taxes, the corporation shall issue a
new certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
ARTICLE VII. FISCAL YEAR
The fiscal year of the Corporation ends June 30 of each year.
ARTICLE VII. SEAL
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the corporation
and the state of incorporation and the words, "Corporate Seal."
ARTICLE IX. AMENDMENTS
The Board of Directors shall have the power to alter, amend or repeal these
Bylaws or adopt new Bylaws, subject to amendment, repeal or adoption of new
Bylaws by action of the shareholders and unless the shareholders in amending,
repealing or adopting a new Bylaw expressly provide that the Board of Directors
may not amend or repeal that Bylaw. The Board of Directors may exercise this
power at any regular or special meeting at which a quorum is present by the
affirmative vote of a majority of the Directors present at the meeting and
without any notice of the action taken with respect to the Bylaws having been
contained in the notice or waiver of notice of such meeting. Unless the
Corporation's Articles of Incorporation or a Bylaw adopted by the shareholders
provide otherwise as to all or some portion of the Bylaws, the Corporation's
shareholders may amend, repeal or adopt new Bylaws even though the Bylaws may
also be amended by the Board of Directors.
ARTICLE X. SUBJECT TO ALL LAWS
The provisions of these Bylaws shall be subject to all valid and applicable
laws, including without limitation the Texas Business Corporation Act and the
Investment Company Act of 1940 (in each case as now or hereafter amended), and
in
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the event that any of the provisions of these Bylaws are found to be
inconsistent or contrary with any such valid laws, the latter shall be deemed to
control and these Bylaws shall be regarded as modified accordingly and, as so
modified to continue in full force and effect.
ARTICLE XI. INDEMNIFICATION
SECTION 1. DEFINITIONS. In this Article:
(a) "DISINTERESTED DIRECTOR" means any director of the Corporation who is
neither an 'interested person' of the Corporation (as defined in Section
2(a)(19) of the Investment Company Act of 1940) nor named as a defendant or
respondent in the Proceeding.
(b) "INDEMNITEE" means (i) any present or former director or officer of the
Corporation, (ii) any person who while serving in any of the capacities referred
to in clause (i) hereof served at the Corporation's request as a director,
officer, partner, venturer, trustee, employee, agent or similar functionary of
another foreign or domestic corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, and (iii) any person nominated or
designated by (or pursuant to authority granted by) the Board of Directors to
serve in any of the capacities referred to in clauses (i) or (ii) hereof.
(c) "OFFICIAL CAPACITY" means (i) when used with respect to a director, the
office of director of the Corporation, and (ii) when used with respect to a
person other than a director, the elective or appointive office of the
Corporation held by such person or the employment or agency relationship
undertaken by such person on behalf of the Corporation, but in each case does
not include service for any other corporation or any partnership, joint venture,
sole proprietorship, trust, employee benefit plan or other enterprise.
(d) "PROCEEDING" means any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, arbitrative or
investigative, any appeal in such an action, suit or proceeding, and any inquiry
or investigation that could lead to such an action, suit or proceeding.
SECTION 2. BASIC INDEMNITY. The Corporation shall indemnify every
Indemnitee against all judgments, penalties (including excise and similar
taxes), fines, amounts paid in settlement, and reasonable expenses actually
incurred by the Indemnitee in connection with any Proceeding in which he was, is
or is threatened to be named defendant or respondent, or in which he was or is a
witness without being named a defendant or respondent, by reason of his serving
or having served, or having been nominated or designated to serve, in any of the
capacities referred to in Section l(b) of this Article, it it is determined in
accordance with Section 4 of this Article that the Indemnitee (a) conducted
himself in good faith and without willful misfeasance, gross negligence or
reckless disregard of the duties involved in the conduct of his office, (b)
reasonably believed, in the case of conduct in his Official Capacity, that his
conduct was in the Corporation's best interests and, in all other cases, that
his conduct was at least not opposed to the Corporation's best interests, and
(c) in the case of any criminal proceeding, had no reasonable cause to believe
that his conduct
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was unlawful; PROVIDED, HOWEVER, that in the event an Indemnitee is found liable
to the Corporation or is found liable on the basis that personal benefit was
improperly received by the Indemnitee the indemnification (i) is limited to
reasonable expenses actually incurred by the Indemnitee in connection with the
proceeding and (ii) shall not be made in respect of any proceeding in which the
Indemnitee shall have been found liable for willful or intentional misconduct in
the performance of his duty to the Corporation. Except as provided in the
immediately preceding proviso to the first sentence of this Section 2, no
indemnification shall be made under this Section 2 in respect of any judgment,
penalty, fine or amount paid in settlement in connection with any Proceeding in
which such Indemnitee shall have been (x) found liable on the basis that
personal benefit was improperly received by him, whether or not the benefit
resulted from an action taken in the Indemnitee's Official Capacity, or (y)
found liable to the Corporation. The termination of any Proceeding by judgment,
order, settlement or conviction, or on a plea of nolo contenders or its
equivalent, is not of itself determinative that the Indemnitee did not meet the
requirements set forth in clauses (a), (b) or (c) in the first sentence of this
Section 2. An Indemnitee shall be deemed to have been found liable in respect of
any claim, issue or matter only after the Indemnitee shall have been so adjudged
by a court of competent jurisdiction after exhaustion of all appeals therefrom.
Reasonable expenses shall include, without limitation, all court costs and all
fees and disbursements of attorneys for the Indemnitee.
SECTION 3. ADDITIONAL INDEMNITY WHERE WHOLLY SUCCESSFUL DEFENSE. In
addition to the indemnification provided for in Section 2 above, the Corporation
shall indemnify every Indemnitee against reasonable expenses incurred by such
person in connection with any Proceeding in which he is a party because he
served in any of the capacities referred to in Section l (b) of this Article, if
such person has been wholly successful, on the merits or otherwise, in defense
of the Proceeding.
SECTION 4. DETERMINATION. Any indemnification under Section 2 of this
Article (unless ordered by a court of competent jurisdiction) shall be made by
the Corporation only upon a determination that indemnification of the Indemnitee
is proper in the circumstances because he has met the applicable standard of
conduct. Such determination shall be made (a) by the Board of Directors by a
majority vote of a quorum consisting of directors who, at the time of such vote,
are Disinterested Directors; (b) if such a quorum cannot be obtained, then by a
majority vote of a committee of the Board of Directors, duly designated to act
in the matter by a majority vote of all directors (in which designation
directors who are not Disinterested Directors may participate), such committee
to consist solely of two or more directors who, at the time of the committee
vote, are Disinterested Directors; (c) by special legal counsel selected by the
Board of Directors or a committee thereof by vote as set forth in clauses (a) or
(b) of this Section 4 or, if the requisite quorum of an of the directors cannot
be obtained therefor and such committee cannot be established, by a majority
vote of all of the directors (in which selection directors who are not
Disinterested Directors may participate); or (d) by the shareholders in a vote
that excludes the shares held by directors that are named defendants or
respondents in the Proceeding. A determination as to reasonableness of expenses
shall be made in the same manner as the determination that indemnification is
permissible, except that if the determination that indemnification is
permissible is made by special legal counsel, the determination as to
reasonableness of expenses must be made in the manner
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specified in clause (c) of the preceding sentence for the selection of special
legal counsel. In the event a determination is made under this Section 4 that
the director or officer has met the applicable standard of conduct as to some
matters but not as to others, amounts to be indemnified may be reasonably
prorated.
SECTION 5. ADVANCEMENT OF EXPENSES. Reasonable expenses (including court
costs and attorneys' fees) incurred by an Indemnitee who was, is or is
threatened to be made a named defendant or respondent in a Proceeding shall be
paid by the Corporation at reasonable intervals in advance of the final
disposition of such Proceeding after a determination is made in the manner
specified by Section 4 of this Article that the facts then known to those making
the determination (without undertaking further investigation for purposes
thereof) do not establish that indemnification would be impermissible under
Section 2 of this Article, and upon receipt by the Corporation of (a) a written
affirmation by such Indemnitee of his good faith belief that he has met the
standard of conduct necessary for indemnification by the Corporation under this
Article, and (b) a written undertaking by or on behalf of such Indemnitee to
repay the amount paid or reimbursed by the Corporation unless it shall
ultimately be determined that he is entitled to be indemnified by the
Corporation as authorized in this Article. Such written undertaking shall be an
unlimited obligation of the Indemnitee but need not be secured and it may be
accepted without reference to financial ability to make repayment. The
provisions of this Article shall not be construed to apply to, or restrict in
any way, the payment or reimbursement by the Corporation of expenses incurred by
an Indemnitee in connection with his appearance as a witness or other
participation in a Proceeding at a time when he is not named a defendant or
respondent in the Proceeding.
SECTION 6. EMPLOYEE BENEFIT PLANS. For purposes of this Article, the
Corporation shall be deemed to have requested an Indemnitee to serve an employee
benefit plan whenever the performance by him of his duties to the Corporation
also imposes duties on or otherwise involves services by him to the plan or
participants or beneficiaries of the plan. Excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable law
shall be deemed fines. Action taken or omitted by an Indemnitee with respect to
an employee benefit plan in the performance of his duties for a purpose
reasonably believed by him to be in the interest of the participants and
beneficiaries of the plan shall be deemed to be for a purpose which is not
opposed to the best interests of the Corporation.
SECTION 7. NON-EXCLUSIVE; SURVIVAL; BENEFIT. The indemnification provided
by this Article shall (a) not be deemed exclusive of, or to preclude, any other
rights to which those seeking indemnification may at any time be entitled under
the Corporation's Articles of Incorporation, any law, agreement or vote of
shareholders or directors, or otherwise, or under any policy or policies of
insurance purchased and maintained by the Corporation on behalf of any
Indemnitee, both as to action in his Official Capacity and as to action in any
other capacity, (b) continue as to a person who has ceased to be in the capacity
by reason of which be was an Indemnitee with respect to matters arising during
the period he served in such capacity, and (c) inure to the benefit of the
heirs, executors and administrators of such a person.
SECTION 8. NOTICE TO SHAREHOLDERS. Any indemnification of or advance of
expenses to a present or former director of the Corporation in accordance with
this
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Article shall be reported in writing to the shareholders of the Corporation with
or before the notice or waiver of notice of the next shareholders' meeting or
with or before the next submission to shareholders of a consent to action
without a meeting and, in any case, within the twelve-month period immediately
following the date of the indemnification or advance.
SECTION 9. CONTINUING OFFER, RELIANCE, ETC. The provisions of this Article
(a) are for the benefit of, and may be enforced by, each Indemnitee the same as
if set forth in theirentirety in a written instrument duly executed and
delivered by the Corporation and the Indemnitee and (b) constitute a continuing
offer to all present and future Indemnitees. The Corporation, by its adoption of
these Bylaws, (1) acknowledges and agrees that each Indemnitee of the
Corporation has relied upon and will continue to rely upon the provisions of
this Article in accepting and serving in any of the capacities referred to in
Section 1 (b) of this Article, (ii) waives reliance upon, and all notices of
acceptance of, such provisions by such Indemnitees and (c) acknowledges and
agrees that no present or future Indemnitees shall be prejudiced in his right to
enforce the provisions of this Article in accordance with their terms by any act
or failure to act on the part of the Corporation.
SECTION 10. EFFECT OF AMENDMENT. No amendment, modification or repeal of
this Article or any provision hereof shall in any manner terminate, reduce or
impair the right of any past, present or future Indemnitees to be indemnified by
the Corporation, nor the obligation of the Corporation to indemnify any such
Indemnitees, under and in accordance with the provisions of the Article as in
effect immediately prior to such amendment, modification or repeal with respect
to claims arising from or relating to matters occurring, in whole or in part,
prior to such amendment, modification or repeal, regardless of when such claims
may arise or be asserted.
SECTION 11. EFFECT UNDER ADVISORY AGREEMENT. For the purposes of ss.5 of
the Investment Advisory Agreement dated October 30, 1981 between the Corporation
and Portfolios, Inc., all payments made pursuant to this Article shall be
considered "extraordinary charges such as litigation costs."
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AMENDMENT TO BYLAWS OF
ARMSTRONG ASSOCIATES, INC.
1. Section 1 of Article II of the Bylaws of the Corporation is hereby
amended to read in its entirety as follows:
"SECTION 1. Annual Meeting. Unless the Board of Directors by
resolution directs otherwise, the Corporation shall not have an annual
meeting of the shareholders for the purpose of electing Directors in any
year that the election of directors is not required to be acted on under
the Investment Company Act of 1940, as now or hereafter amended (the
"Investment Company Act"). If the Corporation is required by the Investment
Company Act to hold an annual meeting of shareholders to elect Directors or
the Board of Directors otherwise decides to have a meeting of shareholders,
the meeting shall be designated as the annual meeting of shareholders for
that year and shall be held at the time and place designated by the Board
of Directors or otherwise in the manner set forth in the resolution of the
Board of Directors calling the meeting."
2. Section 2 of Article V of the Bylaws is hereby amended to read in its
entirety as follows:
"SECTION 2. TIME OF ELECTION. The Board of Directors, at its first
meeting after each annual meeting of shareholders and at such other times
that it deems appropriate, shall choose a president, a secretary and such
additional officers that it deems appropriate, none of whom need to be a
member of the Board."
INVESTMENT ADVISORY AGREEMENT
BETWEEN
ARMSTRONG ASSOCIATES, INC.
AND
PORTFOLIOS, INC.
THIS INVESTMENT ADVISORY AGREEMENT is made this 30th day of October, 1981
by and between Armstrong Associates, Inc., a Texas corporation, and Portfolios,
Inc., a Texas corporation:
W 1 T N E S S E T H:
WHEREAS, the Fund is engaged in business as an open-end investment company
registered under the Investment Company Act; and
WHEREAS, the Adviser is willing to provide investment advisory and
administrative services to the Fund on the terms and conditions hereinafter set
forth:
NOW, THEREFORE, for and in consideration of the mutual promises and
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ss. 1. DEFINITIONS. The terms defined in this ss.l whenever used in this
Agreement shall have the respective meanings hereinafter specified.
"ADVISER" means Portfolios, Inc., a Texas corporation.
"ARTICLES OF INCORPORATION" means the Articles of Incorporation of the
Fund, as from time to time amended.
"AVERAGE DAILY NET ASSETS" means the average of the Fund's net asset
values (determined in accordance with the Articles of Incorporation) at the
close of business on each day on which the New York Stock Exchange is open
for business during the period.
<PAGE>
"BOARD" means the Board of Directors of the Fund.
"FUND" means Armstrong Associates, Inc., a Texas corporation.
"INTERESTED PERSON" has the meaning set forth in Section 2 (a) of the
Investment Company Act.
"INVESTMENT COMPANY ACT" means the Investment Company Act of 1940, as
from time to time amended.
"PRIOR AGREEMENT" means the Investment Advisory Agreement dated
October 30, 1979 between the Fund and the Adviser.
"RESEARCH" means research, statistical and similar information and
services.
"SBH" means Schneider, Bernet & Hickman, Inc., a Texas corporation.
ss. 2. DUTIES OF THE ADVISER. The Adviser shall provide the Fund with such
investment advice and supervision as the Fund may consider necessary for the
proper management of its assets. The Adviser shall act as investment adviser to
the Fund and, as such, shall determine what securities shall be purchased, sold
or exchanged and what portion of the assets of the Fund shall be held
uninvested. The Adviser may take, on behalf of the Fund, all actions which it
deems necessary in connection with the management of the Fund's investments. The
Adviser may place all orders for the purchase or sale of portfolio securities
for the Fund's account with brokers or dealers selected by it, including SBH,
and is authorized as the agent of the Fund to give instructions to the custodian
of the Fund as to deliveries of securities and payments of cash for the account
of the Fund. The rights and duties set forth above are subject always to the
provisions of the Articles of Incorporation and to the provisions of the
Investment Company Act.
ss. 3. ALLOCATION OF CHARGES AND EXPENSES. The Adviser shall furnish to the
Fund, at the Adviser's expense, office space, local telephone service and
utilities, and shall be responsible for the compensation of directors, officers
and employees of the Fund who are Interested Persons of the Adviser. The Fund
shall be responsible for and shall pay all of its own expenses, debts and
liabilities including, without limitation, all of the following: the
compensation of directors who are not Interested Persons of the Adviser;
governmental fees; interest charges; taxes; membership dues in the
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Investment Company Institute and the No-Load Mutual Fund Association, Inc.; fees
and expenses of its legal counsel and of its independent accountants and
auditors; all charges of each transfer agent, registrar, custodian and
disbursing agent of the Fund for all services to the Fund including, without
limitation, those relating to safekeeping of funds and securities, issuance and
redemption of shares of the Fund, solicitation of shareholder votes, shareholder
confirmations and statements, mailings to shareholders and keeping of
shareholder accounts and records; expenses of issuing, delivering, re-purchasing
and redeeming shares; expenses of preparing, printing and mailing stock
certificates, prospectuses, shareholders' reports, notices, proxy statements and
reports to governmental officers and commissions; brokerage and other expenses
connected with the execution of portfolio security transactions; insurance
premiums; expenses of solicitation of shareholder votes; and expenses relating
to the registration and qualification of shares of the Fund under the Securities
Act of 1933, as amended, and state securities or "blue sky" laws; PROVIDED,
HOWEVER, that the Adviser will reimburse the Fund for such expenses to the
extent provided in ss. 5 below.
ss. 4. COMPENSATION OF THE ADVISER. For the services to be rendered and for
the facilities to be furnished as provided in ss.ss. 2 and 3 above, the Fund
shall pay to the Adviser a cash fee, to be calculated and paid monthly as
hereinafter provided in this ss. 4, at the annual rate of .8% of its Average
Daily Net Assets for each fiscal year. Such fee shall be calculated as of the
end of each month during the fiscal year (i) on the basis of such annual rate,
and (ii) cumulatively from the beginning of the current fiscal year to the
month-end as of which the calculation is made, with credit being given to the
Fund for previous fee payments for said year. Within ten days after the
determination of the amount and, in any event, within twenty-five days after the
end of each month, the amount of the fee due by the Fund to the Adviser
hereunder shall be settled between the Fund and the Adviser. All such monthly
calculations and settlements shall be subject to final adjustment as of the end
of each fiscal year. If the Adviser shall serve for less than the whole of any
period specified in this ss. 4, the compensation to the Adviser shall be
prorated.
ss. 5. EXPENSE REIMBURSEMENT. The Adviser agrees to reimburse the Fund for
all expenses (including the advisory fee paid pursuant to ss. 4 above but
excluding interest, taxes, brokerage commissions and extraordinary charges such
as litigation costs) incurred by the Fund with respect to any fiscal year in
excess of the following percentages of its Average Daily Net Assets for the
fiscal year: 2% of the first $10 million of Average Daily Net Assets; 1.5% of
the next $20
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<PAGE>
million of Average Daily Net Assets; and 1% of the remaining Average Daily Net
Assets. Such reimbursement shall be calculated as of the end of each month
during the fiscal year (i) on the basis of such annual percentages and
reasonably anticipated annual expenditures (whether or not such expenses have
been incurred in whole or in part at the date of the calculation), and (ii)
cumulatively from the beginning of the current fiscal year to the month-end as
of which the calculation is made, with credit being given to the Adviser for
previous expense reimbursements for said year. Within ten days after the
determination of the amount and in any event within twenty-five days after the
end of each month, the amount of any reimbursement due by the Adviser to the
Fund hereunder, or of any refund by the Fund to the Adviser of reimbursement
previously made, shall be settled between the Fund and the Adviser. All such
monthly calculations and settlements shall be subject to final adjustment as of
the end of each fiscal year.
ss. 6. BROKERAGE. In discharging its duties pursuant to ss. 2, the Adviser
may give preference, and may cause the Fund to pay higher negotiated commission
rates, to brokers which, in addition to having the capacity of obtaining the
best price for the security itself and of executing the order with speed,
efficiency and confidentiality, also provide Research to the Adviser. Research
furnished by brokers through whom the Fund effects securities transactions may
be used by the Adviser in servicing all of its accounts, and there shall be no
reduction in the compensation of the Adviser hereunder as a consequence of its
receipt of such Research. The Adviser, however, in the allocation of brokerage
must determine in good faith that the amount of the commission is reasonable in
relation to the value of the brokerage services and Research provided by the
broker, viewed in terms of either the particular transaction or the Adviser's
overall responsibilities with respect to the accounts as to which it exercises
investment discretion. Further, any commissions, fees or other remuneration for
brokerage allocated to SBH shall be reasonable and fair compared to the
commissions, fees or other remuneration paid to other brokers in connection with
comparable transactions involving similar securities being purchased or sold
during a comparable period of time. In the allocation of brokerage for the Fund,
the Adviser shall be subject always to such policies and requirements that the
Board may adopt or approve.
ss. 7. ACTIVITIES OF THE ADVISER. The services of the Adviser to the Fund
are not deemed to be exclusive, and the Adviser shall be free to engage in any
other business or to render similar services to others.
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<PAGE>
ss. 8. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall
become effective upon its execution and shall continue in effect for two years
from the date of its execution, and thereafter, but only so long as such
continuance is specifically approved at least annually (i) by the vote of a
majority of the directors of the Fund who are not parties to this Agreement or
Interested Persons of the Fund or the Adviser at a meeting specifically called
for the purpose of voting on such approval, and (ii) by the Board or by a vote
of a majority of the outstanding voting securities of the Fund. This Agreement
may be terminated by the Adviser at any time without penalty on 60 days' written
notice, and may be terminated at any time without penalty by the Board or by the
vote of a majority of the outstanding voting securities of the Fund on 60 days'
written notice. This Agreement shall automatically terminate in the event of its
transfer or assignment.
ss. 9. TERMINATION OF PRIOR AGREEMENT. The Prior Agreement is hereby
terminated effective at the opening of business on the date hereof, and the
relations of the parties thereafter shall be governed by the terms of this
Agreement.
ss. 10. ACCOUNTING PRINCIPLES. All computations under this Agreement
affecting or pertaining to fees, expenses and expense reimbursements shall be
made in accordance with generally accepted accounting principles.
ss. 11. INVESTMENT COMPANY ACT. This Agreement is made subject to the
provisions of the Investment Company Act.
IN WITNESS WHEREOF, the parties hereto have caused this Investment Advisory
Agreement to be executed as of the date first above written.
ARMSTRONG ASSOCIATES, INC.
By /s/ Candace L. King
---------------------------
Vice President
PORTFOLIOS, INC.
By /s/ C.K. Lawson
---------------------------
President
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CUSTODY AGREEMENT
THIS AGREEMENT is entered into as of September 9, 1994, between ARMSTRONG
ASSOCIATES, INC. ("Fund"), a corporation, having its principal office and place
of business at 750 North St. Paul, Dallas, Texas 75201 and THE BANK OF
CALIFORNIA, NATIONAL ASSOCIATION (the "Bank"), a National Banking Association
organized under the laws of the United States with its principal place of
business at 400 California Street, San Francisco, CA 94104.
In consideration of the mutual promises set forth below, the Fund and the Bank
agree as follows:
1. DEFINITIONS.
Whenever used in this Agreement or in any Schedules to this Agreement, the words
and phrases set forth below shall have the following meanings, unless the
context otherwise requires:
1.1 "Authorized Person" shall mean the President, and any Vice President,
the Secretary, the Assistant Secretary, the Treasurer and any Assistant
Treasurer of the Fund, or any other person, including persons employed by the
investment manager of the Fund, whether or not any such person is an officer of
the Fund, duly authorized by the Board of Trustees of the Fund to give Written
Instructions on behalf of the Fund and listed in the certification annexed
hereto as Appendix A or such other certification as may be received by the Bank
from time to time.
1.2 "Book-Entry System" shall mean the Federal Reserve/Treasury book-entry
system for United States and federal agency securities, its successor or
successors and its nominee or nominees.
1.3 "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission under
Section 17(a) of the Securities Exchange Act of 1934, as amended, its successor
or successors and its nominee or nominees, in which the Bank is hereby
specifically authorized to make deposits. The term "Depository" shall further
mean and include any other person to be named in Written Instructions authorized
to act as a depository under the 1940 Act, its successor or successors and its
nominee or nominees.
1.4 "Money Market Security" shall mean any security generally referred to
as a "money market" instrument, and shall be deemed to include, without
limitation, debt obligations issued or guaranteed as to interest and principal
by the Government of the United States or agencies or instrumentalities thereof,
and repurchase and reverse repurchase agreements with respect to any of the
foregoing types of securities, commercial paper, bank certificates of deposit,
bankers' acceptances and short-term corporate obligations, where the purchase or
sale of such securities normally requires settlement in federal funds on the
same day as such purchase or sale.
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1.5 "Prospectus" shall mean the Fund's current prospectus and statement of
additional information relating to the registration of the Fund's Shares under
the Securities Act of 1933, as amended.
1.6 "Security" or "Securities" shall mean any security and other investment
from time to time owned by any Portfolio, and shall be deemed to include,
without limitation, bonds, debentures, notes, stocks, shares, evidences of
indebtedness, and other securities and investments from time to time owned by
each.Portfolio of the Fund.
1.7 "Shares" shall mean the shares of beneficial interest of a Portfolio of
the Fund.
1.8 "Portfolio" shall mean Portfolios shown on Schedule A, attached hereto
and made a part hereof by this reference, and any such other Portfolio as may
from time to time be created and designated in accordance with the Articles of
Incorporation.
1.9 "Transfer Agent" shall mean the person which performs the transfer
agent, dividend disbursing agent and shareholder servicing agent functions for
the Fund.
1.10 "Written Instructions" shall mean a written or electronic
communication including facsimile actually received by the Bank from an
Authorized Person or from a person reasonably believed by the Bank to be an
Authorized Person by telex or any other such system whereby the receiver of such
communication is able to verify through codes or otherwise with a reasonable
degree of certainty the authenticity of the sender of such communication.
1.11 "Oral Instructions" shall mean an oral or telephonic or similar
communication actually received by the Bank from an Authorized Person or from a
person reasonably believed by the Bank to be an Authorized Person by telephone
or any other such system whereby the receiver of such communication is able to
verify with a reasonable degree of certainty the authenticity of the sender of
the communication. All Oral Instruction shall be confirmed by Written
Instructions.
1.12 The "1940 Act" shall mean the Investment Company Act of 1940, and the
rules and regulations thereunder, all as amended from time to time.
2. APPOINTMENT OF CUSTODIAN.
2.1 The Fund hereby constitutes and appoints the Bank as custodian of all
the Securities and moneys owned by or in the possession of the Fund during the
period of this Agreement.
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2.2 The Bank hereby accepts appointment as custodian for the Fund and
agrees to perform the duties thereof as hereinafter set forth. In addition to
the specific duties set forth in this Agreement, the Bank will in general attend
to all routine and mechanical matters in connection with the sale, exchange,
substitution, purchase, transfer, deposit or other dealings with Securities or
other property of the Fund except as may be otherwise provided in this Agreement
or directed from time to time by the Board of Trustees of the Fund.
2.3 The Bank agrees to notify the Fund promptly should its aggregate
capital, surplus, and undivided profits fall below prescribed minimums under the
1940 Act or, for any reason, should it becomes unqualified to act as Custodian
under the 1940 Act or other law.
3. COMPENSATION.
3.1 The Fund will compensate the Bank for its services rendered under this
Agreement in accordance with the fees set forth in the Fee Schedule attached as
Schedule B and made a part of this Agreement by this reference.
3.2 The parties to this Agreement will agree upon the compensation for
acting as Custodian for any Portfolio hereafter established and designated, and
at the time that the Bank commences serving as such for said Portfolio, such
agreement shall be reflected in a revised Fee Schedule for the Fund, which shall
be attached to Schedule B of this Agreement.
3.3 Any compensation agreed to hereunder may be adjusted from time to time
by not less than 90 days advance written notice of such fee increase from the
Bank to Fund.
3.4 The Bank will bill the Fund as soon as practicable after the end of the
month, and said billings will be detailed in accordance with the Fee Schedule.
The Fund will promptly pay to the Bank the amount of such billing. In the event
such bill is not promptly paid with respect to a Portfolio, the Bank may charge
against any money specifically allocated to the Portfolio such compensation and
any expenses incurred by the Bank in the performance of its duties pursuant to
this Agreement. The Bank shall also be entitled to charge against any money held
by it and specifically allocated to a Portfolio the amount of any loss, damage,
liability or expense incurred with respect to such Portfolio, including counsel
fees, for which it shall be entitled to reimbursement under the provisions of
this Agreement.
There shall be no additional fees or expenses to the Fund incurred by the
Bank's use of Sub-Custodians or foreign branches of the Bank in settling
Portfolio Security transactions outside of San Francisco or New York City.
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<PAGE>
4. CUSTODY OF CASH AND SECURITIES.
4.1 RECEIPT AND HOLDING OF ASSETS. The Fund will deliver or cause to be
delivered to the Bank all Securities and moneys owned by it, including cash
received from the issuances of its Shares, at any time during the period of this
Agreement and shall specify the Portfolio to which the Securities and moneys are
to be specifically allocated. The Bank shall physically segregate and keep apart
on its books the assets of each Portfolio, including separate identification of
Securities held in the Book-Entry System. The Bank will not be responsible for
such Securities and moneys until actually received by it. The Fund shall
instruct the Bank from time to time in its sole discretion, by means of Written
Instructions or Oral Instruction confirmed by Written Instructions, as to the
manner in which and in what amounts Securities and moneys of a Portfolio are to
be deposited on behalf of such Portfolio in the Book-Entry System or the
Depository and specifically allocated on the books of the Bank to such
Portfolio. Securities and moneys of the Fund deposited in the Book-Entry System
or the Depository will be represented in accounts which include only assets held
by the Bank for customers, including but not limited to accounts in which the
Bank acts in a fiduciary or representative capacity.
4.2 ACCOUNTS AND DISBURSEMENTS. The Bank shall establish and maintain a
separate account for each Portfolio and shall credit to the separate account of
each Portfolio all moneys received by it for the account of such Portfolio and
shall disburse the same only:
4.2.1 In payment for Securities purchased for such Portfolio, as
provided in Section 5 hereof;
4.2.2 In payment of dividends or distributions with respect to the
Shares of such Portfolio;
4.2.3 In payment of original issue or other taxes with respect to the
Shares of such Portfolio;
4.2.4 In payment for Shares which have been redeemed by such
Portfolio;
4.2.5 Pursuant to Written Instructions, or Oral Instructions confirmed
by Written Instructions setting forth the name of such Portfolio, the name and
address of the person to whom the payment is to be made. the amount to be paid
and the purpose for which payment is to be made; or
4.2.6 In payment of fees and in reimbursement of the expenses and
liabilities of the Bank attributable to such Portfolio.
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<PAGE>
4.2.7 The Bank shall upon receipt of written Instructions, or Oral
Instructions confirmed by Written Instructions, establish and maintain a
segregated account or accounts for and on behalf of each Portfolio of the Fund,
into which account or accounts may be transferred cash and Securities, (i) in
accordance with the provisions of any agreement among the Fund, the Bank and a
broker-dealer registered under the Securities and Exchange Act of 1934 (the
"1934 Act") and a member of the NASD (or any futures commission merchant
registered under the Commodities Exchange Act), relating to compliance with the
rules of the Options Clearing Corporation and of any registered national
securities exchange (or the Commodities 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
Fund, (ii) for purposes of segregating cash or government securities in
connection with options purchased, sold or written by the Fund or commodity
futures contracts or options thereon purchased or sold by the Fund, (iii) for
the purposes of compliance by the fund with the procedures required by
Investment Company Act Release No. 10666, or any subsequent release or releases
of the Securities and Exchange Commission relating to the maintenance of
segregated accounts by registered investment companies and (iv) for other proper
corporate purposes.
4.3 CONFIRMATIONS AND STATEMENTS. Promptly after the close of business each
day, the Bank shall make available to the Fund information with respect to all
transfers to and from the account of each Portfolio during that day. The Bank
need not send written confirmation or a summary of all such transfers to or from
the account of each Portfolio. Provided, however that upon the written request
the Fund, the Bank shall provide within 5 business days of such written request
a copy of any confirmations which include transactions of the Fund. Where
securities purchased by a Portfolio are in a fungible bulk of Securities
registered in the name of the Bank (or its nominee) or shown on the Bank's
account on the books of the Depository or the Book-Entry System, the Bank shall
by book entry or otherwise identify the quantity of those securities belonging
to such Portfolio. At least monthly, the Bank shall furnish the Fund with a
detailed statement of the Securities and moneys held for each Portfolio under
this Agreement.
4.4 REGISTRATION OF SECURITIES AND PHYSICAL SEPARATION.
All Securities held for a Portfolio which are issued or issuable only in
bearer form, except such Securities as are held in the Book-Entry System, shall
be held by the Bank in that form; all other Securities held for a Portfolio may
be registered in the name of any duly appointed registered nominee of the Bank
as the Bank may from time to time determine, or in the name of the Book-Entry
System or the Depository or their successor or successors, or their nominee or
nominees. When a reference is made in this Agreement to an action to be taken by
the Bank it is understood by the parties that the action may be taken directly
or in the case of book-entry securities, through the appropriate depository. The
Fund agrees to furnish to the Bank appropriate instruments to enable the Bank to
hold or deliver in proper form for transfer, or to register in the name of its
registered nominee or in the
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<PAGE>
name of the Book-Entry System or the Depository, any Securities which it may
hold for the account of a Portfolio. The Bank (or its sub-custodians) shall hold
all such Securities specifically allocated to a Portfolio which are not held in
the Book-Entry System or the Depository in a separate account for such Portfolio
in the name of such Portfolio and physically segregated at all times from those
of any other person or persons.
4.5 COLLECTION OF INCOME AND OTHER MATTERS AFFECTING SECURITIES. Unless
otherwise instructed to the contrary by Written Instructions, the Bank shall
with respect to all Securities held for a Portfolio in accordance with this
Agreement:
4.5.1 Collect all income due or payable and credit such income
promptly on the contractual settlement date, whether or not actually received,
to the account of the appropriate Portfolio, except for income from foreign
issues (which shall be collected as soon as reasonably practicable and shall be
credited when actually received). Income which has not been collected after
reasonable effort, within a time agreed upon between the parties, shall be
repaid to the Bank pending final collection at such date as may be mutually
agreed upon by the Fund and the Bank.
4.5.2 Present for payment and collect the amount payable upon all
Securities which may mature or be called, redeemed or retired, or otherwise
become payable. The Bank shall make a good faith effort to inform the Fund of
any call, redemption or retirement date with respect to securities which are
owned by a Portfolio and held by the Bank or its nominee. Notwithstanding the
foregoing, the Bank shall have no responsibility to the Fund or a Portfolio for
monitoring or ascertaining of any call, redemption or retirement date with
respect to securities which are owned by a Portfolio and held by the Bank or its
nominee. Nor shall the Bank have any responsibility or liability to the Fund or
to a Portfolio for any loss by a Portfolio for any missed payment or other
default resulting therefrom with respect to any put security owned by a
Portfolio and held by the Bank or its nominee unless the Bank received timely
general notification, which shall not be less than 5 business days, from the
Fund or the Portfolio specifying the time, place and manner for the presentment
of any such put security. The Bank shall not be responsible and assumes no
liability to the Fund or a Portfolio for the accuracy or completeness of any
notification the Bank shall provide to the Fund or a Portfolio with respect to
put securities;
4.5.3 Execute any necessary declarations or certificates of ownership
under the Federal income tax laws or the laws or regulations of any other taxing
authority now or hereafter in effect; and
4.5.4 Hold for the account of each Portfolio all rights and other
Securities issued with respect to any Securities held by the Bank hereunder for
such Portfolio.
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<PAGE>
4.6 DELIVERY OF SECURITIES AND EVIDENCE OF AUTHORITY. Upon receipt of
Written Instructions, or Oral Instructions confirmed by Written instructions,
the Bank shall:
4.6.1 Execute and deliver or cause to be executed and delivered, to
such persons as may be designated in such Written Instructions, proxies,
consents, authorizations, and any other instruments whereby the authority of the
Fund as owner of any Securities may be exercised;
4.6.2 Deliver or cause to be delivered any Securities held for a
Portfolio in exchange for other Securities or cash issued or paid in connection
with the liquidation, reorganization, refinancing, merger, consolidation or
recapitalization of any corporation, or the exercise of any conversion
privilege;
4.6.3 Deliver or cause to be delivered any Securities held for a
Portfolio to any protective committee, reorganization committee or other person
in connection with the reorganization, refinancing, merger, consolidation or
recapitalization or sale of assets of any corporation, and receive and hold
under the terms of this Agreement such certificates of deposit, interim receipts
or other instruments or documents as may be issued to it to evidence such
delivery;
4.6.4 Make or cause to be made such transfers or exchanges of assets
and take such steps as shall be stated in said Written Instructions, or Oral
Instructions confirmed by Written Instructions, to be for the purpose of
effectuating any duly authorized plan of liquidation, reorganization, merger,
consolidation or recapitalization of the Fund or a Portfolio;
4.6.5 Deliver Securities owned by any Portfolio upon sale of such
Securities for the account of such Portfolio pursuant to Section 5;
4.6.6 Deliver Securities owned by any Portfolio upon the receipt of
payment in connection with any repurchase agreement related to such Securities
entered into by such Portfolio;
4.6.7 Deliver Securities owned by any Portfolio to the issuer thereof
or its agent when such Securities are called, redeemed, retired or otherwise
become payable; provided, however, that in any such case the cash or other
consideration is be delivered to the Bank;
4.6.8 Deliver Securities owned by any Portfolio upon receipt of
instructions from such Portfolio for delivery to the Transfer Agent or to the
holders of Shares of such Portfolio in connection with distributions in kind, as
may be described from time to time in the Fund's Prospectus, in satisfaction of
requests by holders of Shares for repurchase or redemption; and
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<PAGE>
4.6.9 Deliver Securities owned by any Portfolio for any other proper
business purpose, but only upon receipt of, in addition to Written Instructions,
a certified copy of a resolution of the Board of Trustees signed by an
Authorized Person and certified by the Secretary or Assistant Secretary of the
Fund, specifying the Securities to be delivered, setting forth the purpose for
which such delivery is to be made, declaring such purpose to be a proper
business purpose, and naming the person or persons to whom delivery of such
Securities shall be made.
4.7 ENDORSEMENT AND COLLECTION OF CHECKS. ETC. The Bank is hereby
authorized to endorse and collect all checks, drafts or other orders for the
payment of money received by the Bank for the account of a Portfolio.
5. PURCHASE AND SALE OF INVESTMENTS OF THE PORTFOLIO.
5.1 Promptly after each purchase of Securities for a Portfolio, the Fund
shall deliver to the Bank Written Instructions or Oral Instructions confirmed by
Written Instructions, specifying with respect to each purchase: (1) the name of
the Portfolio to which such Securities are to be specifically allocated; (2) the
name of the issuer and the title of the Securities; (3) the number of shares or
the principal amount purchased and accrued interest, if any; (4) the date of
purchase and settlement; (5) the purchase price per unit; (6) the total amount
payable upon such purchase; (7) the name of the person from whom or the broker
through whom the purchase was made, if any; (8) whether or not such purchase is
to be settled through the Book-Entry System or the Depository; and (9) whether
the Securities purchased are to be deposited in the Book-Entry System or the
Depository. The Bank shall receive all Securities purchased by or for a
Portfolio and upon receipt of such Securities shall pay out of the moneys held
for the account of such Portfolio the total amount payable upon such purchase,
provided that the same conforms to the total amount payable as set forth in such
Written Instructions, or Oral Instructions confirmed by Written Instructions.
5.2 Promptly after each sale of Securities of a Portfolio, the Fund shall
deliver to the Bank Written Instructions, or Oral Instructions confirmed by
Written Instructions, specifying with respect to such sale: (1) the name of the
Portfolio to which the Securities sold were specifically allocated; (2) the name
of the issuer and the title of the Securities; (3) the number of shares or
principal amount sold, and accrued interest, if any; (4) the date of sale; (5)
the sale price per unit; (6) the total amount payable to the Portfolio upon such
sale; (7) the name of the broker through whom or the person to whom the sale was
made; and (8) whether or not such sale is to be settled through the Book-Entry
System or the Depository. The Bank shall deliver or cause to be delivered the
Securities to the broker or other person designated by the Fund upon receipt of
the total amount payable to such Portfolio upon such sale, provided that the
same conforms to the total amount payable to such Portfolio as set forth in such
written Instructions, or Oral Instructions confirmed by Written Instructions.
Subject to the foregoing, the
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<PAGE>
Bank may accept payment in such form as shall be satisfactory to it, and may
deliver Securities and arrange for payment in accordance with the customs
prevailing among dealers in Securities.
6. PAYMENT OF DIVIDENDS OR DISTRIBUTIONS.
6.1 The Fund shall furnish to the Bank the resolution of the Board of
Directors of the Fund certified by the Secretary or Assistant Secretary (i)
authorizing the declaration of dividends or distribution with respect to a
Portfolio on a specified periodic basis and authorizing the Bank to rely on
Written Instructions specifying the date of the declaration of each dividend or
distribution, the date of payment thereof, the record date as of which
shareholders entitled to payment shall be determined, the amount payable per
share to the shareholders of record as of the record date and the total amount
payable per share to the shareholders of record as of the record date and the
total amount payable to be transferred to an appropriate deposit account that
the transfer agent may write checks against on the payment date, or (ii) setting
forth the date of declaration of any dividend or distribution by a Portfolio,
the date of payment thereof, the record date as of which shareholders entitled
to payment shall be determined, the amount payable per share to the shareholders
of record as of the record date and the total amount payable to the appropriate
deposit account on the payment date.
6.2 Upon the payment date specified in such resolution or Written
Instructions the Bank shall pay out the moneys specifically allocated to and
held for the account of the appropriate Portfolio the total amount payable to
the appropriate deposit account.
7. SALE AND REDEMPTION OF SHARES OF A PORTFOLIO.
7.1 Whenever the Fund shall sell or redeem any Shares of a Portfolio, the
Fund shall deliver or cause to be delivered to the Bank Written Instructions, or
Oral Instructions confirmed by Written Instructions, duly specifying:
7.1.1 The name of the Portfolio whose Shares were sold or redeemed;
7.1.2 The number of Shares sold or redeemed, trade date, and price;
and
7.1.3 The amount of money to be received or paid by the Bank for the
sale or redemption of such Shares.
7.2 Upon receipt of such money from the Transfer Agent, the Bank shall
credit such money to the separate account of the Portfolio.
7.3 Upon issuance of any Shares of a Portfolio in accordance with the
foregoing provisions of this Section 7, the Bank shall pay, out of the moneys
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<PAGE>
specifically allocated and held for the account of such Portfolio, all original
issue or other taxes required to be paid in connection with such issuance upon
the receipt of Written Instructions, or Oral instructions confirmed by Written
Instructions, specifying the amount to be paid.
7.4 Upon receipt from the Transfer Agent of advice setting forth the number
of Shares of a Portfolio received by the Transfer Agent for redemption and that
such Shares are valid and in good form for redemption, the Bank shall transfer
to the appropriate deposit account out of the moneys specifically allocated to
and held for the account of the Portfolio.
8. INDEBTEDNESS.
8.1 The Fund will cause to be delivered to the Bank, by any bank (excluding
the Bank) from which the Fund borrows money for temporary administrative or
emergency purposes using Securities as collateral for such borrowings, a notice
or undertaking in the form currently employed by such bank setting forth the
amount which such bank will loan to the Fund against delivery of a stated amount
of collateral. The Fund shall promptly deliver to the Bank Written Instructions,
or Oral instructions confirmed by Written Instructions, stating with respect to
each such borrowing: (1) the name of the Portfolio for which the borrowing is to
be made; (2) the name of the bank; (3) the amount and terms of the borrowing,
which may be set forth by incorporating by reference an attached promissory
note, duly endorsed by the Fund, or other loan agreement; (4) the time and date,
if known, on which the loan is to be entered into (the "borrowing date"); (5)
the date on which the loan becomes due and payable; (6) the total amount payable
to the Fund for the separate account of the Portfolio on the borrowing date; (7)
the market value of Securities to be delivered as collateral for such loan,
including the name of the issuer, the title and the number of shares or the
principal amount of any particular Securities; (8) whether the Bank is to
deliver such collateral through the Book-Entry System or the Depository; and (9)
a statement that such loan is in conformance with the 1940 Act and the Fund's
Prospectus.
8.2 Upon receipt of the Written Instructions, or Oral Instructions
confirmed by Written Instructions, referred to above, the Bank shall deliver on
the borrowing date the specified collateral and the executed promissory note, if
any, against delivery by the lending bank of the total amount of the loan
payable, provided that the same conforms to the total amount payable as set
forth in the Written Instructions, or Oral Instructions confirmed by Written
Instructions. The Bank may at the option of the lending bank keep such
collateral in its possession, but such collateral shall be subject to all rights
therein given the lending bank by virtue of any promissory note or loan
agreement. The Bank shall deliver as additional collateral in the manner
directed by the Fund from time to time such Securities specifically allocated to
such Portfolio as may be specified in Written Instructions, or Oral Instructions
confirmed by Written Instructions, to collateralize further any transaction
described in this Section 8. The Fund shall cause all Securities released from
collateral status to be returned directly to the Bank, and the Bank shall
receive from time to time such return of collateral as may be
-10-
<PAGE>
tendered to it. In the event that the Fund fails to specify in written
Instructions, or Oral Instructions confirmed by Written Instructions, all of the
information required by this Section 8, the Bank shall not be under any
obligation to deliver any Securities. Collateral returned to the Bank shall be
held hereunder as it was prior to being used as collateral.
9. PERSONS HAVING ACCESS TO ASSETS OF THE FUND.
9.1 No Trustee, officer, employee or agent of the Fund, and no officer,
director, employee or agent of the Fund's investment advisor, shall have
physical access to the assets of any Portfolio held by the Bank or be authorized
or permitted to withdraw any investments of any Portfolio, nor shall the Bank
deliver any assets of any Portfolio to any such person. No officer, director,
employee or agent of the Bank who holds any similar position with the Fund or
the Fund's investment advisor shall have access to the assets of the Fund.
9.2 The individual employees of the Bank initially duly authorized by the
Board of Directors of the Bank to have access to the assets of the Fund are
listed on Schedule C which is attached and made a part of this Agreement by this
reference. The Bank shall advise the Fund of any change in the individuals
authorized to have access to the assets of the Fund by written notice to the
Fund.
9.3 Nothing in this Section 9 shall prohibit any officer, employee or agent
of the Fund, or any officer, director, employee or agent of the Fund's
investment advisor, from giving Written Instructions, or Oral Instructions
confirmed by Written Instructions, to the Bank so long as it does not result in
delivery of or access to assets of any Portfolio prohibited by this Section 9.
10. CONCERNING THE BANK.
10.1 STANDARD OF CONDUCT, The Bank 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 reasonably believed by it
to be valid or genuine and shall be held harmless in acting upon proper
instructions, resolutions, 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 and shall be entitled to receive as conclusive proof of
any fact or matter required to be ascertained by it hereunder a certificate
signed by the President, a Vice President, the Treasurer, the Secretary or an
Assistant Secretary of the Fund. The Bank may receive and accept a 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 Declaration of Trust as described in such resolution,
and such resolution may be considered as in full force and effect until receipt
by the Bank of written notice from the Secretary or an Assistant Secretary of
the Fund to the contrary.
-11-
<PAGE>
The Bank shall be entitled to rely on and may act upon advice of counsel
(who may be counsel for the Fund) on all matters, and shall be without liability
for any action reasonably taken or omitted pursuant to such advice. Provided,
however, that if such reliance involves a potential material loss to the Fund,
the Bank shall advise the Fund in advance and in writing of any such actions to
be taken in accordance with such advice of counsel to the Bank.
The Bank shall be held to the exercise of reasonable care in carrying out
the provisions of this Agreement but shall be liable only for its own negligent
or bad faith acts or willful misconduct or willful failures to act by the Bank
and its agents or employees. The Bank shall have no responsibility for reviewing
or questioning the acts or records of any prior custodian. The Fund shall
indemnify the Bank and hold it harmless from and against all losses,
liabilities, demands, claims, actions, expenses, attorneys' fees, and taxes with
respect to each Portfolio which the Bank may suffer or incur on account of being
Custodian hereunder except to the extent that such losses, liabilities, demands,
claims, actions, expenses, attorneys fees or taxes arise from the Bank's own
negligence or bad faith or willful misconduct or willful failure to act.
If the Fund requires the Bank to take any action with respect to Securities
of a Portfolio, which action involves the payment of money or which action may,
in the opinion of the Bank, result in the Bank or its nominee assigned to such
Portfolio being liable for the payment of money or incurring liability of some
other form, the Fund, as a prerequisite to requiring the Bank to take such
action, shall, prior to the Bank taking such action, provide indemnity in
writing to the Bank in an amount and form satisfactory to it.
The Bank shall not be liable for any loss of data or any delay in its
performance under this Agreement to the extent such loss or delay is due to
causes beyond its control, including but not limited to: acts of God,
interruption in, loss of or malfunction in power, significant computer hardware
or systems software or telephone communication service; act of civil or military
authority, sabotage; war or civil commotion; fire; explosion; or strike (except
that the Bank shall at all time be required to maintain minimum critical
activities). The Bank shall use its best efforts to minimize any such loss or
delay by all practical steps and to replace any lost data promptly. The Bank
agrees not to discriminate against the Fund in favor of any other customer of
the Bank in making computer time and its personnel available to input and
process transactions hereunder when such a loss of data or delay occurs.
10.2 LIMIT OF DUTIES. Without limiting the generality of the foregoing, the
Bank shall be under no duty or obligation to inquire into, and shall not be
liable for:
10-2.1 The validity of the issue of any Securities purchased by any
Portfolio, the legality of the purchase thereof, the permissibility of the
purchase thereof under the Fund's governing documents, or the propriety of the
amount paid therefor;
-12-
<PAGE>
10.2.2 The legality of the sale of any Securities by any Portfolio,
the permissibility of such sale under the Fund's governing documents, or the
propriety of the amount for which the same are sold;
10.2.3 The legality of the issue or the sale of any Shares of any
Portfolio, or the sufficiency of the amount to be received therefor;
10.2.4 The legality of the redemption of any Shares of any Portfolio,
or the propriety of the amount to be paid therefor;
10.2.5 The legality of the declaration or payment of any dividend or
other distribution of any Portfolio;
10.2.6 The legality of any borrowing for temporary or emergency
administrative purposes.
10.3 NO LIABILITY UNTIL RECEIPT. The Bank shall not be liable for, or
considered to be the custodian of, any money, whether or not represented by any
check, draft, or other instrument for the payment of money, received by it on
behalf of any Portfolio until the Bank actually receives and collects such money
directly or by the final crediting of the account representing the Fund's
interest in the Book-Entry System or the Depository.
10.4 COLLECTION WHERE PAYMENT REFUSED. The Bank shall not be under any duty
or obligation to take action to effect collection of any amount, if the
Securities upon which such amount is payable are in default, or if payment is
refused after due demand or presentation, unless and until (a) it shall be
directed to take such action by Written Instructions, or Oral Instructions
confirmed by Written Instructions, and (b) it shall be assured to its
satisfaction of reimbursement of its costs and expenses in connection with any
such action.
10.5 APPOINTMENT OF AGENTS AND SUB-CUSTODIANS. The Bank may appoint one or
more banking institutions, including but not limited to banking institutions
located in foreign countries, to act as depository or depositories or as
sub-custodian or as sub-custodians of Securities and moneys at any time owned by
any Portfolio, upon terms and conditions specified in Written Instructions, or
Oral Instructions confirmed by Written Instructions. As such depository or
sub-custodian shall be approved in advance by the Board of Trustees of the
Trust. The Custodians shall remain primarily responsible for the Securities of
the Fund held by any one depository or sub-custodian in the same manner as if
held directly by the Custodian.
10.6 NO DUTY TO ASCERTAIN: AUTHORITY. The Bank shall not be under any duty
or obligation to ascertain whether any Securities at any time delivered to or
held by it for the Fund and specifically allocated to a Portfolio are such as
may properly be held by the Portfolio and specifically allocated to such
Portfolio under the provisions of the Articles of Incorporation and the Fund's
Prospectus.
-13-
<PAGE>
10.7 RELIANCE ON CERTIFICATES AND INSTRUCTIONS. The Bank shall be entitled
to rely upon any Written Instructions or Oral Instructions actually received by
the Bank pursuant to the applicable Sections of this Agreement and reasonably
believed by the Bank to be genuine and to be given by an Authorized Person. The
Fund agrees to forward to the Bank Written Instructions from an Authorized
Person confirming such Oral Instructions in such manner so that such Written
Instructions are received by the Bank, whether by hand delivery, telex, or
otherwise, by the close of business on the same day that such Oral Instructions
are given to the Bank. The Fund agrees that the fact that such confirming
instructions are not received by the Bank shall in no way affect the validity
for the transactions or enforceability of the transactions hereby authorized by
the Fund. The Fund agrees that the Bank shall incur no liability to the Fund in
acting upon Oral Instructions given to the Bank hereunder concerning such
transactions provided such instructions reasonably appear to have been received
from a duly Authorized Person.
10.8 MAINTENANCE AND INSPECTION OF BOOKS AND RECORDS.
The Bank will create, maintain, preserve for the specified periods and make
available upon request, all records relating to its activities and obligations
under this Agreement in such a manner as will meet the obligations of the Fund
under the Investment Company Act of 1940, including records required by Rule
3la-I of the General Rules and Regulations under the 1940 Act and under other
applicable federal and state tax laws and any other law or administrative rules
or procedures which may be applicable to the Fund. All such records shall be the
property of the Fund. The books and records of the Bank regarding the Fund shall
be open to inspection and audit at reasonable times by officers and auditors
employed by the Fund and by employees of the Securities and Exchange Commission.
The Bank shall provide the Fund, upon request, with any report obtained by the
Bank on the system of internal accounting control of the Book-Entry System or
the Depository and with such reports on its own systems of internal accounting
control (including reports by the Bank's independent accountants for
distribution generally to customers of the Bank) as the Fund may reasonably
request from time to time.
10.9 Neither the Bank nor any nominee of the Bank shall vote any of the
securities held hereunder by or for the account of the Fund, except in
accordance with Written Instructions, or Oral Instructions confirmed by Written
Instructions, from the Fund. The Bank shall promptly deliver, or cause to be
executed and delivered, to the Fund all notices, proxies and proxy soliciting
materials with relation to such Securities (if registered otherwise than in the
name of the Fund), but without indicating the manner in which such proxies are
to be voted. The Bank shall also promptly deliver to the Fund all other
communications it may receive with respect to the Securities held by it
hereunder.
The Bank shall also transmit promptly to the Fund all written information
(including, without limitation, pendency of calls and maturities of securities
and expirations of rights in connection therewith and notices of exercise of
call and put options written by the Fund and the maturity of futures contracts
-14-
<PAGE>
purchased or sold by the Fund) received by the Bank from issuers of the
securities being held for the Fund. With respect to capital changes or
reorganizations the Bank shall transmit promptly to the Fund or its advisors all
information received from issuers or their agents which requires an action by
the Fund or its advisor. If the Fund desires to take action with respect to any
tender offer, exchange offer or any other similar transactions, the Fund shall
notify the Bank at least three business days prior to the date on which the Bank
is to take such action.
11. TERM AND TERMINATION.
11.1 This Agreement shall become effective on the date first set forth
above (the "Effective Date") and shall continue in effect thereafter as the
parties may mutually agree.
11.2 Either of the parties hereto may terminate this Agreement with respect
to any Portfolio by giving to the other party a notice in writing specifying the
date of such termination, which shall be not less than 90 days after the date of
receipt of such notice. In the event such notice is given by the Fund, it shall
designate a successor custodian or custodians, which shall be a person qualified
to so act under the 1940 Act. In the event such notice is given by the Bank, the
Fund shall, on or before the termination date, deliver to the Bank, Written
Instructions, or Oral Instructions confirmed by Written Instructions,
designating a successor Custodian or Custodians. In the absence of such
designation by the Fund, the Bank may designate a successor Custodian, which
shall be a person qualified to so act under the 1940 Act. If the Fund fails to
designate a successor Custodian for any Portfolio, the Fund shall upon the date
specified in the notice of termination of this Agreement and upon the delivery
by the Bank of all Securities (other than Securities held in the Book-Entry
System which cannot be delivered to the Fund) and moneys then owned by such
Portfolio, be deemed to be its own Custodian and the Bank shall thereby be
relieved of all duties and responsibilities pursuant to this Agreement, other
than the duty with respect to Securities held in the Book-Entry System which
cannot be delivered to the Fund.
11.3 Upon the date set forth in such notice under Section 11.2, this
Agreement shall terminate to the extent specified in such notice, and the Bank
shall upon receipt of a notice of acceptance by the successor Custodian on that
date deliver directly to the successor Custodian all Securities and moneys then
held by the Bank and specifically allocated to the Portfolio specified, after
deducting all fees, expenses and other amounts for the payment or reimbursement
of which it shall then be entitled with respect to such Portfolio.
12. ADDITIONAL SERVICES BY BANK.
12.1 If allowed by the Prospectus, the Fund's investment adviser may direct
that the assets of any Portfolio be invested in deposits in the Bank or its
affiliates bearing a reasonable rate of interest.
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<PAGE>
12.2 Any Authorized Person may direct the Bank to utilize other services or
facilities provided by BanCal Tri-State Corp. ("BanCal"), its subsidiaries or
affiliates including the Bank. Such services shall include, but not be limited
to (1) the placing of orders for the purchase, sale exchange, investment or
reinvestment of securities through any brokerage service conducted by, or (2)
the purchase of units of any investment company managed or advised by the Bank,
BanCal, or their subsidiaries or affiliates and/or for which the Bank, BanCal,
or their subsidiaries or affiliates act as custodian or provide investment
advice or other services for a fee, including, without limitation, the HighMark
Group of Funds. The Fund hereby acknowledges that the Bank, BanCal or their
subsidiaries or affiliates will receive fees for such services in addition to
the fees payable under this Agreement. Fee Schedules for such additional
directed services shall be delivered to the Authorized Person before provision
of such services.
13. MISCELLANEOUS.
13.1 Annexed hereto as Schedule C is a certification signed by two of the
present officers of the Fund setting forth the names and the signatures of the
present Authorized Persons. The Fund agrees to furnish to the Bank a new
certification in similar form in the event that any such present Authorized
Person ceases to be such an Authorized Person or in the event that other or
additional Authorized Persons are elected or appointed. Until such new
certification shall be received, the Bank shall be fully protected in acting
under the provisions of this Agreement upon signatures of the present Authorized
Persons as set forth in the last delivered certification.
13.2 Annexed hereto as Appendix B is a certification signed by two of the
present officers of the Fund setting forth the names and the signatures of the
present officers of the Fund. The Fund agrees to furnish to the Bank a new
certification in similar form in the event any such present officer ceases to be
an officer of the Fund or in the event that other or additional officers are
elected or appointed. Until such new certification shall be received, the Bank
shall be fully protected in acting under the provisions of this Agreement upon
the signature of the officers as set forth in the last delivered certification.
13.3 Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Bank, shall be sufficiently given if addressed
to the Bank and mailed or delivered to it at its offices at:
The Bank of California, N.A.
Mutual Fund Services Dept., Fund Group
475 Sansome Street, 15th Floor
San Francisco, California 94111
or such other place as the Bank may from time to time designate in writing.
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<PAGE>
13.4 Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund, shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its offices at:
Armstrong Associates, Inc.
750 North St. Paul, LB 13, Suite 1300
Dallas, Texas 75201
or at such other place as the Fund may from time to time designate in writing.
13.5 This Agreement may not be amended or modified in any manner except by
a written agreement executed by both parties with the same formality as this
Agreement, and as may be permitted or required by the 1940 Act.
13.6 This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund without the written consent
of the Bank, or by the Bank without the written consent of the Fund authorized
or approved by a resolution of the Board of Directors of the Fund, and any
attempted assignment without such written consent shall be null and void.
13.7 This Agreement shall be construed in accordance with the laws of the
State of California (with regard to principles of conflicts of law).
13.8 It is expressly agreed to that the obligations of the Fund hereunder
shall not be binding upon any of the Directors, shareholders, nominees,
officers, agents, or employees of the Fund, personally, but bind only the
property of the Fund, as provided in the Articles of Incorporation of the Fund.
The execution and delivery of this Agreement have been authorized by the
Directors of the Fund and signed by an authorized officer of the Fund, acting as
such, and neither such authorization by such Directors nor such execution and
delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but shall
bind only the Fund property of the Fund as provided in its Articles of
Incorporation.
13.9 The captions of the 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.
13.10 This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
13.11 The Bank represents and warrants to the Fund that it is a national
banking association duly organized and existing and in good standing under the
laws of the United States; it is duly qualified to carry on its business in the
State of California; it is empowered under applicable laws and by its
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<PAGE>
charter and by-laws to enter into and perform this Agreement; all requisite
corporate proceedings have been taken to authorize it to enter into and perform
this Agreement; all requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement; and it is duly authorized to act as
a custodian under the 1940 Act.
The Fund represents and warrants to the Bank that it is a corporation duly
organized and existing and in good standing under the laws of the State of
Texas; it is empowered under applicable laws and by its Articles of
Incorporation to enter into and perform this Agreement; all proceedings required
by said Articles of Incorporation have been taken to authorize it to enter into
and perform this Agreement; and it is an open-end, diversified investment
company registered under the Investment Company Act of 1940.
14. ARBITRATION.
Any controversy or claim arising out of or relating to this Agreement or
any related agreements or instruments, including any claim based on or arising
from any alleged tort, will be determined by arbitration in accordance with
either the Commercial Arbitration Rules of the American Arbitration Association
or the Rules of Judicial Arbitration and Mediation Service, Inc. (at the option
of the party initiating the arbitration) and the Federal Arbitration Act Title 9
of the U.S. Code. The parties agree that related arbitration proceedings may be
consolidated and the arbitrator shall prepare written reasons for the award.
Judgment upon the award rendered may be entered into any court having
jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunder duly authorized as of the day
and year first above written.
ARMSTRONG ASSOCIATES, INC.
By: /s/ C.K. Lawson
-----------------------------
Title: President
--------------------------
Date: 9/9/94
---------------------------
THE BANK OF CALIFORNIA, N.A.
By: /s/ Mary Fowler
-----------------------------
Mary Fowler
Title: Vice President
Date: 9/9/94
---------------------------
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<PAGE>
Schedule A - Funds
ARMSTRONG ASSOCIATES, INC.
ARMSTRONG ASSOCIATES, INC.
By: /s/ C.K. Lawson
-----------------------------
Title: President
--------------------------
Date: 9/9/94
---------------------------
THE BANK OF CALIFORNIA, N.A.
By: /s/ Mary Fowler
-----------------------------
Mary Fowler
Title: Vice President
Date: 9/9/94
---------------------------
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<PAGE>
Shedule B
MUTUAL FUNDS
ANNUAL ADMINISTRATION
First $50 Million 4 Basis Points
Next $50 Million 2 Basis Points
Over $1 00 Million Negotiable
Custodian fees for services rendered under a Custodian-Depository Agreement
are as follows:
ITEMIZED FEES
Transaction Fee $15 Depository Eligible
$40 Depository Ineligible
$40 Options
$50.00 United Kingdom, Canada
Monthly Holding Fee $ 2 Depository eligible
$ 4 Depository Ineligible
Fedwires $10
CMO Paydowns $20
Additional Asset/Cash Statements $10
Out-of-Pocket Expenses As incurred
MINIMUM ANNUAL AGGREGATE FEE $2,500
This fee schedule is guaranteed for two years.
Portfolios, Inc.
by: /s/ C.K. Lawson
-----------------------------
Date: 9/9/94
---------------------------
The Bank of California, N.A.
by: /s/ Mary Fowler
-----------------------------
Date: 9/9/94
---------------------------
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<PAGE>
Schedule C
Authorized Persons
Part I - Access Persons of Bank
Mary Fowler
Mark Peterson
Charles Casillas
Cari Umekubo
Audrey Bough
Part II - Authorized Persons of the Fund
Candace L. King
C.K. Lawson
Part III - Officers
ARMSTRONG ASSOCIATES, INC.
By: /s/ C.K. Lawson
---------------------------
Title: President
------------------------
Date: 9/9/94
-------------------------
THE BANK OF CALIFORNIA, N.A.
By: /s/ Mary Fowler
---------------------------
Mary Fowler
Title: Vice President
Date: 9/9/94
-------------------------
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AMENDED AND RESTATED
TRANSFER AGENT AGREEMENT
This Amended and Restated Transfer Agent Agreement made this 17th day of
May, 1995, to be effective as of January 1, 1995, by and between Armstrong
Associates, Inc., a Texas corporation (the "Fund"), which is an open-end
investment company, and Portfolios, Inc., a Texas corporation (the "Transfer
Agent").
WITNESSETH THAT:
WHEREAS, pursuant to a previously executed Transfer Agent Agreement dated
effective January 1, 1995 (the "Original Agreement"), the Transfer Agent has
agreed to act as Transfer, Redemption and Dividend Disbursing Agent for the Fund
and the Transfer Agent also has agreed to act for the Fund in other respects as
stated in the Original Agreement; and
WHEREAS, the parties wish to enter into this Amended and Restated Transfer Agent
Agreement to set forth the understanding between the parties and supersede the
Original Agreement in all respects; and
WHEREAS, pursuant to a separate agreement the Fund has appointed a bank
acceptable to the Transfer Agent as primary Custodian of the securities, cash
and other assets of the Fund, hereinafter referred to as the Custodian Bank, and
may with the agreement of the Transfer Agent appoint one or more subcustodians;
NOW, THERFORE, in consideration of the promises and mutual covenants contained
herein, the Original Agreement is amended and restated to read in its entirety
as follows:
Section 1.
- ----------
The Fund hereby appoints the Transfer Agent as its Transfer, Registrar,
Redemption Agent and Dividend Disbursing Agent and the Transfer Agent accepts
such appointments and agrees to act in such capacities upon the terms set forth
in this Agreement.
The Transfer Agent agrees to comply with all relevant provisions of the
Investment Company Act Of 1940 (the "Act"), the Internal Revenue Code, other
applicable laws and all applicable rules and regulations thereunder.
The Fund shall furnish to the Transfer Agent a sufficient supply of blank Share
Certificates and from time to time will renew such supply upon the request of
the Transfer Agent. Such blank Share certificates shall be signed manually or by
facsimile signatures of officers of the Fund authorized by law or the by-laws of
the Fund to sign Share Certificates and, if required, shall bear the Fund's seal
or facsimile thereof.
<PAGE>
Section 2.
- ----------
The Transfer Agent shall make original issues of Shares in accordance with
Sections 12 and 13 below and with the Fund's then currently effective Prospectus
upon being furnished with (I) a certified copy of a resolution or resolutions of
the Board of Directors of the Fund authorizing such issue and (ii) necessary
funds for the payment of any original issue tax applicable to such additional
Shares. If requested, a copy of the opinion of counsel as to the validity of
such additional Shares shall be furnished to the Transfer Agent upon the Fund's
filing of its Rule 24f-2 Notice under the Act with the Securities and Exchange
Commission.
Section 3.
- ----------
Transfers of Shares shall be registered and, subject to the provisions of
Section 9, new Share Certificates issued by the Transfer Agent upon surrender of
outstanding Share Certificates, if any, (I) in form deemed by the Transfer Agent
to be properly endorsed for transfer, (ii) with all necessary endorsers'
signatures guaranteed by a member firm of a national securities exchange, the
NASD, or a commercial bank, except when the requirement of a signature guarantee
is waived in accordance with the Fund's then current Prospectus or SAI or when
otherwise authorized by the Fund pursuant to Written Instructions (as defined in
Section 33 below), accompanied by (iii) such assurances as the Transfer Agent
shall deem necessary or appropriate to evidence the genuineness and
effectiveness of each necessary endorsement, and (iv) satisfactory evidence of
compliance with all applicable laws relating to the payment or collection of
taxes. The Transfer Agent shall retain all shareholder applications and shall
compare the signature(s) on written redemption requests with the signature on
the shareholder applications as may be necessary in the opinion of the Transfer
Agent, provided that the Transfer Agent shall be liable for any loss due to
forgery or improper signature of any kind resulting from the negligence of the
Transfer Agent in making or failing to make such comparison.
Section 4.
- ----------
When mail is used for delivery of Share Certificates the Transfer Agent shall
forward Share Certificates in "non-negotiable" form by first-class mail, and
Share Certificates in "negotiable" form by registered mail, return receipt
requested, all mail deliveries to be covered while in transit to the addressee
by insurance arranged for by the Transfer Agent.
Section 5.
- ----------
In registering transfers of Shares the Transfer Agent may rely upon the Uniform
Commercial Code or any other statutes which in the opinion of counsel protect
the Transfer Agent and the Fund in not requiring complete documentation (subject
to compliance with procedures set forth in the Fund's then current Prospectus
and/or (SAI), in registering transfer without inquiry into adverse claims, in
delaying registration for purposes of such inquiry, or in refusing registration
where in its judgment an adverse claim requires such refusal.
-2-
<PAGE>
Section 6.
- ----------
The Transfer Agent may issue new Share Certificates in place of Share
Certificates represented to have been lost, destroyed or stolen, upon receiving
indemnity satisfactory to the Transfer Agent and the Fund any may issue new
Share Certificates in exchange for, and upon surrender of, mutilated Share
Certificates.
Section 7.
- ----------
In case any officer of the Fund who shall have signed manually or whose
facsimile signature shall have been affixed to blank Share Certificates shall
die, resign or be removed prior to the issuance of such Share Certificates, the
Transfer Agent may issue or register such Share Certificates as the Share
Certificates of the Fund notwithstanding such death, resignation or removal
until otherwise directed by the Fund; and the Fund shall file promptly with the
Transfer Agent such approval, adoption or ratification as may be required by
law.
Section 8.
- ----------
The Transfer Agent will maintain mutual fund account records in the usual form
in which, among other details, it will note the issuance, transfer and
redemption of Shares, whether certificated or not. Whenever a Shareholder
deposits Shares represented by Share Certificates in an account, the Transfer
Agent upon receipt of the Share Certificates registered in the name of the
Shareholder (or if not so registered, in proper form for transfer), shall cancel
such Share Certificates and make appropriate entries in its stock transfer
records. The Transfer Agent will keep account records, part of which shall be
the stock transfer records, in which it will note the names and registered
addresses of Shareholders and the number of Shares and fractions owned by them,
whether or not Share Certificates are outstanding.
Section 9.
- ----------
The Transfer Agent shall issue Share Certificates for Shares only upon receipt
of a written request from a Shareholder. In all other cases, the Transfer Agent
shall dispense with the issuance and countersignature of Share Certificates
whenever Shares are purchased. The Transfer Agent shall process purchase and
redemption transactions by making appropriate entries in the Fund's account
records.
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<PAGE>
Section 10.
- -----------
The Transfer Agent shall, in addition to the duties and functions
above-mentioned, perform the usual duties and functions of a stock Transfer
Agent for a corporation. It shall countersign for issuance or re-issuance Share
Certificates representing original issue or reissued treasury Shares as directed
by the Written Instructions of the Fund and shall transfer Share Certificates
registered in the name of Shareholders from one Shareholder to another in the
usual manner. The Transfer Agent may rely conclusively and act without further
investigation upon any list, instruction, certification, authorization, Share
Certificate or other instrument or paper reasonably believed by it in good faith
to be genuine and unaltered, and to have been signed, countersigned, or executed
by duly authorized person or persons, or upon the instructions of any duly
authorized officer of the Fund, or upon the advice of counsel for the Fund or
for the Transfer Agent. The Transfer Agent may record any transfer of Share
Certificates which is reasonably believed by it in good faith to have been duly
authorized or may refuse to record any transfer of Share Certificates if in good
faith the Transfer Agent deems such refusal necessary to avoid any liability on
the part of either the Fund or the Transfer Agent; provided, however, that the
Transfer Agent shall promptly notify the Fund of any such refusal to record any
transfer and shall act in accordance with the Fund's Written Instructions, if
any. The Fund agrees to indemnify and hold harmless the Transfer Agent from and
against any and all losses, costs, claims, and liability which it may suffer or
incur by reason of so relying or acting or refusing to act.
Section 11.
- -----------
In case of any request or demand for the inspection of the share records of the
Fund, the Transfer Agent shall endeavor to notify the Fund and to secure
instructions as to permitting or refusing such inspection. However, the Transfer
Agent may (after giving written notice to the Fund) exhibit such records to any
person in any case where it is advised by its counsel that it may be held liable
for failure so to do, unless indemnified against such liability by the Fund.
ISSUANCE OF SHARES
Section 12.
- -----------
For the purposes of this Section, the Fund hereby instructs the Transfer Agent
to consider Shareholder payments as available for investment in accordance with
the policies and procedures set forth in the Fund's then current Prospectus and
SAI. Immediately after the time or times and on each day on which the Fund's
then Current Prospectus or SAI states that its net asset value per share shall
be determined, the Transfer Agent shall obtain from the Fund or its designated
agent a quotation of the net asset value per share
-4-
<PAGE>
determined as of such time on such day. The Transfer Agent reserves the right to
charge the Fund its reasonable costs of making corrections to shareholder
records if it is later determined that the Fund supplied an inaccurate net asset
value.
The Transfer Agent shall, on the same business day on which any order for the
purchase of Shares is received and utilizing the net asset value per share next
determined after the receipt of such order, determine the amount to be invested
and the number of Shares and fractional Shares (rounded to three decimal places)
to be purchased. The Transfer Agent shall thereupon as agent for the
Shareholders place a purchase order with the Fund for the proper number of
Shares and fractional Shares to be purchased and confirm such number to the Fund
in writing. The Transfer Agent shall total the amount available for investment
in Shares at the net asset value determined by the Fund or its designated agent
at each Fund pricing time.
The Transfer Agent shall pay over to the Custodian Bank the net asset value of
Shares and fractional Shares purchased immediately upon receipt of the
consideration therefor. In the event that any check or other order for the
payment of money is returned unpaid for any reason, the Transfer Agent shall
give prompt notification to the Fund of the non-payment of said check and take
such action as the Fund may authorize by Written Instructions.
Any profit on the liquidation of unpaid shares accrues to the Fund. In the event
of loss upon the liquidation of unpaid shares the Transfer Agent will charge the
purchaser's account for the amount of such loss. If the balance in such account
is insufficient to cover the loss the Transfer Agent will assist the Fund in the
Fund's efforts to recover any such losses from the purchaser.
Section 13.
- -----------
The Transfer Agent, in making the calculations provided for in Section 12, shall
rely on its record of available investment funds. The proper number of Shares
and fractional Shares shall then be issued daily and credited by the Transfer
Agent to the shareholder accounts. The Transfer Agent shall mail to each
Shareholder a confirmation of each purchase (if provided for under the
provisions of the Shareholder's account) no later than the next business day,
with copies to interested parties if requested.
Such confirmation shall among other details show the prior Share balance, the
new Share balance, the dollar value, the Shares for which stock Certificates are
outstanding (if any), the amount invested and the price paid for the
newly-purchased Shares.
The Transfer Agent shall provide the Fund with the total number of shares issued
by the Fund each day. In the case any issue of shares would result in over
issuance, the Transfer Agent shall notify the Fund.
-5-
<PAGE>
REDEMPTIONS
Section 14.
- -----------
The Transfer Agent shall process all requests from Shareholders to redeem Shares
and determine the number of Shares required to be redeemed to make monthly
payments, automatic payments or the like and advise the Fund, on the same
business day that the request for redemption was received, of the total number
of Shares and fractional Shares (rounded to three decimal places) to be
redeemed. Notwithstanding the foregoing, if a redemption request is for a dollar
value of Shares in excess of the dollar value of Shares in the specified account
or is not in accordance with the requirements of the Prospectus and/or SAI, the
Transfer Agent shall not effect such redemption in whole or in part, and shall
immediately advise both the Fund and the Shareholder of such discrepancy. The
Fund or its designated agent shall then quote to the Transfer Agent the
applicable net asset value; whereupon the Transfer Agent shall furnish the Fund
with an appropriate confirmation of the redemption and process the redemption,
at the net asset value per share next computed after receipt of the order for
redemption, by filing with the Custodian an appropriate statement and making the
proper distribution and application of the redemption proceeds in accordance
with the Fund's Prospectus or SAI. The stock registry books recording
outstanding Shares and the individual account of the Shareholder shall be
properly debited. If provided for under the provisions of the shareholder's
account, the Transfer Agent shall mail to each Shareholder a confirmation of
each redemption no later than the next business day, with copies to interested
persons if requested. Such confirmation shall among other details show the prior
Share balance, the new Share balance and total dollar value thereof, the Shares
for which stock certificates are outstanding (if any), the amount redeemed and
the price received for the redeemed Shares.
Section 15.
- -----------
The proceeds of redemption shall be remitted by the Transfer Agent, in each case
by draft or other instrument drawn against funds held by the Fund in the
Custodian Bank, in accordance with the Fund's then currently effective
Prospectus or SAI as follows:
a. By check drawn to the order of and mailed to the Shareholder at the
address of record not later than the fifth business day after the
redemption request is received.
b. To a person other than the Shareholder or to an address other than the
Shareholder's registered address only if instructions are received in
writing with signature guaranteed. Plan holders transferring to
another Plan are also required to provide the written acceptance of
the new custodian.
-6-
<PAGE>
c. By other procedures commonly followed by mutual funds and mutually
agreed upon by the Fund and the Transfer Agent.
Any change in the registered address will be accepted by the Transfer Agent only
if made in writing by the Shareholder, with signature guaranteed, unless a
different procedure is agreed to in writing by the Fund and the Transfer Agent.
If required by the Fund's then current Prospectus or SAI, the request and stock
certificates, if any, for Shares being redeemed, must have the owner's signature
guaranteed by a domestic commercial bank or trust company or a member firm of a
national securities exchange or the NASD. If Share Certificates have not been
issued to the redeeming Shareholder, the signature of the Shareholder on the
redemption request must be similarly guaranteed. If the Fund authorizes the
Transfer Agent by Written Instructions to waive the signature Guarantee in
certain instances, the Fund hereby provides the Transfer Agent, its successors
and assigns, the same protections the Transfer Agent would normally receive from
a signature guarantee requirement.
For the purposes of redemption of Shares which have been purchased by check
within 15 business days of a receipt of the redemption request for such shares,
the Fund shall provide the Transfer Agent, from time to time, with Written
Instructions concerning the time within which such requests may be honored. The
Transfer Agent has no responsibility to determine if any investment payment will
be reversed for any reason and is not responsible in any way for the failure of
any investment to be collected.
The authority of the Transfer Agent to perform its responsibilities under
Sections 14 and 15 shall be suspended upon the Transfer Agent's receipt of
notification of the suspension of the determination of the Fund's net asset
value.
DIVIDENDS
Section 16.
- -----------
Upon the declaration of each dividend and each capital gains distribution by the
Board of Directors of the Fund, the Fund shall notify the Transfer Agent by
Written Instructions of the date of such declaration, the amount payable per
share, the sources from which such dividend or distribution is made, and, unless
such dividend is a regular daily or monthly dividend payable by a money market
or other fund, the record date for determining the Shareholders entitled to
payment. The ex-date and payment date shall always be the next determination of
net asset value after the record date. The Transfer Agent shall withhold such
sums as may be required to be withheld under applicable income tax laws, rules
and regulations.
-7-
<PAGE>
Section 17.
- -----------
Upon the payment date of a dividend or distribution declared by the Fund's Board
of Directors, the Fund will cause the Custodian Bank to transfer to the
disbursement account maintained by the Custodian in the name of the Fund the
total amount of such dividends or distributions payable in cash to those
Shareholders electing to receive such dividends or distributions in cash. The
Transfer Agent shall prepare a check in the appropriate amount and mail it not
later than the fifth business day after the payment date to such Shareholder at
his address of record or to such other address as the Shareholder, may have
designated in writing.
With regard to Shareholders not electing to receive such dividends or
distributions in cash, the Transfer Agent will automatically reinvest all
dividends and other such distributions in additional shares at the net asset
value per share on payment date. When provided by the provisions of the
Shareholder's account, the Transfer Agent will promptly mail to each shareholder
at his address of record or such other address as the Shareholder may have
designated a statement showing the of full number and fractional shares (rounded
to three decimal places) currently owned by the Shareholder and the net asset
value of the shares so credited to the Shareholder's account.
The Transfer Agent's dividend statement will meet the applicable requirements of
the Act and Rule 19a-1 thereunder for notification as to the source(s) of
dividend payment(s). Where further notification detail is required, the Transfer
Agent shall prepare and distribute the information necessary as directed by the
Fund.
GENERAL PROVISIONS
Section 18.
- -----------
The Transfer Agent shall provide to the Fund's investors confirmations with each
transaction.
Section 19.
- -----------
The Transfer Agent shall report daily the sales and redemptions in each state in
a manner suitable for state "blue-sky" reporting by the Fund. The Transfer Agent
has no further responsibility as to controlling sales of Fund Shares or
maintaining the various registrations required under state "blue sky" laws and
regulations. If the Fund notifies the Transfer Agent, the Transfer Agent will
stop Shares from being sold in all states where the Fund's registration is not
current. Maintaining current registration information on-line is the
responsibility of the Fund.
-8-
<PAGE>
Section 20.
- -----------
The Transfer Agent shall maintain records (which may be part of the stock
transfer records) in connection with the issuance and redemption of Shares and
the administration of the Plans and dividend reinvestments, in which will be
noted the transactions effected for each Shareholder and the number of Shares
and fractional Shares (rounded to three decimal places) owned by each for which
no Share Certificates are outstanding. The Transfer Agent shall create and
maintain all necessary records in accordance with good custodial practice,
including, but not limited, to, records required by Section 31(a) of the Act and
Section 17(A) of the Securities and Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder. The Transfer Agent agrees to make
available upon request and to preserve for the periods prescribed in Section
31(a) under the Act and Section 17(A) of the Securities and Exchange Act of
1934, as amended, and the rules and regulations thereunder, any records relating
to services provided under this Agreement or maintained. by it on behalf of the
Fund. All such records shall be the property of the Fund.
The Transfer Agent shall also maintain the following records for each
Shareholder's account: name, address, and tax identification number; number of
Shares held and specific form of holding, including numbers and denominations of
certificates, if any; historical information regarding the account of each
Shareholder, including dividends paid, distributions made and date and price for
all transactions in a Shareholder's account; any stop or restraining order
placed against a Shareholder's account; any dividend reinvestment order,
dividend address and correspondence relating to the maintenance of a
Shareholder's account; all tax and withholding information relating to a
Shareholder's account; information with respect to withholding on foreign
accounts.
The Transfer Agent shall maintain records for all accounts opened by entities
assigned an institution number ("institution") so that where required the
aggregate average daily value of all of an institution's accounts can be
determined and a record of such values maintained, and so that duplicate
statements for the accounts can be prepared and sent to each institution.
The Transfer Agent represents and warrants that the various procedures and
systems which it has implemented with regard to safeguarding from loss and
damage attributable to fire, theft, or any other cause of the Fund's blank
checks, blank share certificates, records and other data and the Transfer
Agent's records, data, equipment, facilities, and other property used in the
performance of its obligations hereunder are adequate and that it will make such
changes therein from time to time as are reasonably required for the secure
performance of its obligations hereunder.
-9-
<PAGE>
Section 21.
- -----------
The Transfer Agent shall maintain such records as shall enable the Fund to
fulfill in a timely fashion the filing requirements of Form N-SAR or of any
successor monthly, quarterly or annual report required by the Act or rules and
regulations thereunder to be filed by the Fund. All such records shall be the
property of the Fund.
Section 22.
- -----------
The Transfer Agent shall cooperate with the Fund's independent public
accountants and shall take all reasonable action in the performance of its
obligations under this Agreement to assure that the necessary information is
made available to such accountants for the expression of their opinion,
including but not limited to the opinion included in the Fund's annual or
semi-annual reports on Form N-SAR, or of any successor annual report required by
the Act or rules thereunder to be filed by the Fund.
Section 23.
- -----------
In addition to the services as Transfer Agent as above set forth, the Transfer
Agent will perform other services for the Fund as agreed from time to time,
including but not limited to, preparation of filing with the Internal Revenue
Service and mailing to Shareholders such Federal Tax Information Forms as are
required to be so prepared, filed and mailed by applicable laws, rules and
regulations, mailing periodic reports of the Fund, preparation of Shareholder
lists as necessary, and mailing initial notices of shareholder's meetings,
proxies and proxy statements.
The Transfer Agent shall answer telephone calls and correspondence from
Shareholders relating to their share accounts. The Transfer Agent shall respond
to all inquiries from Shareholders relating to the administration of their
accounts within one (1) business day with respect to answers delivered by
telephone and within three (3) business days with respect to answers delivered
in writing or in any lesser time period as may be required by applicable law.
Copies of all correspondence from Shareholders involving complaints about the
management of the Fund, the services provided by or for the Fund, the Transfer
Agent or others, or concerning complaints relating to the fund shall be sent
immediately to the Fund. Summaries of any similar matters conveyed by a
Shareholder by telephone shall be prepared by the Transfer Agent and sent to the
Fund within three(3) business days.
Telephone calls and correspondence on other matters will be referred to the
Fund.
The Transfer Agent shall keep records of Shareholder substantive telephone calls
and correspondence and replies thereto, and of the lapse of time between receipt
of such substantive telephone calls
-10-
<PAGE>
and correspondence and the making of replies.
Section 24.
- -----------
Nothing contained in this Agreement is intended to or shall require the Transfer
Agent in any capacity hereunder to perform any functions or duties on any day
identified in the Prospectus and/or SAI on which the Fund is closed. Functions
or duties normally scheduled to be performed on such days shall be performed on,
and as of, the next business day on which the Transfer Agent is open, except
when the Transfer Agent is closed to observe a legal emergency when the Fund is
open and the Fund has received purchases or redemption requests, such purchases
and redemptions shall be priced and executed "as of" such date on the business
day next following such day.
Section 25.
- -----------
The Fund agrees to pay the Transfer Agent compensation for its services and to
reimburse it for expenses, as set forth in Schedule A attached hereto, or as
shall be set forth in amendments to such Schedule approved by the Fund and the
Transfer Agent. All such payments and reimbursements shall be charged to and
paid by the Fund on a monthly basis.
Section 26.
- -----------
The Transfer Agent in acting in any other capacity set forth in this Agreement,
shall not be personally liable for any taxes, assessments, or governmental
charges which may be levied or assessed on any basis whatsoever in connection
with the administration of the Plans, excepting only for taxes assessed against
the Transfer Agent in its corporate capacity arising out of its compensation
hereunder.
Section 27.
- -----------
The Transfer Agent shall not be liable hereunder for any non-negligent action
taken in good faith and reasonably believed to be within the powers conferred
upon it by this Agreement. The Fund shall indemnify the Transfer Agent and hold
it harmless from any and against any and all actions, suits and claims, whether
groundless or otherwise, arising directly or indirectly out of or in connection
with its performance under this Agreement including but not limited to its
performance as Transfer Agent from and against any and all losses, damages,
costs, charges, counsel fees, payments, expenses and liabilities incurred by the
Transfer Agent in connection with any such action, suit, or claim, except such
as shall result from its own negligent act, omission or willful misconduct or
that of its officers, agents or employees. The Fund shall not be required to
indemnify the Transfer Agent against any expenses or liabilities arising out of
a default judgment, a confession of judgment or a settlement entered into
without the
-11-
<PAGE>
prior written consent of the Fund. The Transfer Agent shall not be under any
obligation to prosecute or to defend any action, suit or claim arising out of or
in connection with its performance under this Agreement as Transfer Agent which,
in the opinion of its counsel, may involve it in expense or liability. At its
option the Fund may and upon request of the Transfer Agent the Fund shall assume
the entire defense of any action, suit, or claim subject to the foregoing
indemnity. The Transfer Agent shall give the Fund notice, and reasonable
opportunity to defend, any such action, suit, or claim, in the name of the Fund
or the Transfer Agent or both. In the event the Fund assumes the defense, the
Transfer Agent shall be responsible for its own legal fees and expenses from the
date the Fund so assumes the defense, except for such fees and expenses incurred
at the request of the Fund. The Fund and the Transfer Agent shall cooperate
fully in the defense of any action, suit or claim.
The Transfer Agent at its expense will make corrections and adjustments as may
be required, where the Transfer Agent, its officers, agents, employees or
delegates are the cause of any error made in rendering the services described in
this agreement.
Without limitation of the foregoing:
a. The Transfer Agent may rely upon and shall not be liable to the Fund
for the advice of the Fund, counsel (who may be counsel for the Fund
or counsel for the Transfer Agent) and upon statements of accountants,
brokers and other persons believed by it in good faith to be expert in
the matters about which they are consulted and for any actions taken
in good faith upon such statements.
b. The Transfer Agent shall not be liable for any action reasonably taken
in good faith reliance upon any Written Instructions or certified copy
of any resolution of the Board of Directors of the Fund, provided,
however, that upon receipt of a Written Instruction countermanding a
prior Instruction which has been fully executed by the Transfer Agent,
the Transfer Agent shall attempt to honor to the extent then possible,
such later instructions and rely upon the genuineness of any such
document or correspondence reasonably believed in good faith to have
been validly executed.
c. The Transfer Agent may rely and shall be protected in acting upon any
signature, instruction, request, letter of transmittal, certificate,
opinion of counsel, statement, instrument, report, notice, consent,
order, or other paper or document reasonably believed by it to be
genuine and to have been signed or presented by the Shareholder, Fund
or other proper party or parties.
-12-
<PAGE>
Section 28.
- -----------
The Fund shall promptly cause to be turned over to the Transfer Agent (i) an
accurate list of Shareholders of the Fund showing the proper registered address
and number of Shares owned and whether such shares are represented by
outstanding Share Certificates or by non-certificated share accounts, (ii) all
records relating to Plans, including original applications signed by the
Planholders and original plan accounts recording payments, contributions,
deductions, reinvestments, withdrawals and liquidations, and (iii) all
shareholder records, files., and other materials necessary or appropriate for
proper performance of the functions assumed by the Transfer Agent under this
Agreement (hereinafter called "Materials"). The Fund agrees to indemnify and
hold the Transfer Agent, its successors and assigns, harmless of and from any
and all expenses, damages, claims, suits, liabilities, actions, demand and
losses of third parties arising out of or in connection with any error,
omission, inaccuracy or other deficiency of such Materials, or out of the
failure of the Fund to provide any portion of such Materials or to provide any
information needed by the Transfer Agent to perform knowledgeably its functions.
The Fund agrees to pay reasonable compensation to the Transfer Agent to cover
the Transfer Agent's expenses in correcting any such error, omission, inaccuracy
or other deficiency of the Materials.
Section 29.
- -----------
The Transfer Agent shall at all times act in good faith and shall use its best
efforts to ensure the accuracy of all services performed under this Agreement
and shall be liable for and shall indemnify and hold the Fund harmless from and
against any and all actions, suits and claims, whether groundless or otherwise,
and from and against any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liabilities incurred by the Fund, in connection with any
such action, suit or claim arising directly or indirectly out of or in
connection with errors caused by the Transfer Agent's negligence, bad faith or
willful misconduct or that of its agents or employees The Transfer Agent shall
not be required to indemnify the Fund against any expenses or liabilities
arising out of a default judgment, a confession of judgment or a settlement
entered into without the prior written consent of the Transfer Agent. The Fund
shall not be under any obligation to prosecute or defend any action, suit or
claim arising directly or indirectly out of or in connection with errors caused
by the Transfer Agent's negligence, bad faith or willful misconduct or that of
its employees or agents which, in the opinion of its counsel, may involve it in
expense or liability. The Transfer Agent may at its option and, upon request of
the Fund and Transfer Agent shall, assume the entire defense of any action, suit
or claim subject to the foregoing indemnity. The Fund shall give the Transfer
Agent notice of, and reasonable opportunity to defend, any such action, suit or
claim in the name of the Fund or the Transfer Agent or both. In the event the
Transfer Agent assumes the
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<PAGE>
defense, the Fund shall be responsible for its own legal fees and expenses from
the date the Fund so assumes the defense, except for such fees and expenses
which are incurred at the request of the Transfer Agent. The Transfer Agent and
the Fund agree to cooperate fully in the defense of any such action, suit or
claim.
Section 30.
- -----------
The Transfer Agent acknowledges and agrees that all books and records maintained
for the Fund in any capacity under this agreement are the property of the Fund
and may be inspected by the Fund at any reasonable time.
The Transfer Agent agrees to regard and preserve as confidential all records and
other information relative to the Fund, and will not without written authority
of the Fund disclose to others, during the term of this Agreement or thereafter,
any such records or other information, except as may be reasonably necessary to
enable the Transfer Agent to maintain any software by the Transfer Agent in the
performance of its duties hereunder, provided the Transfer Agent has obtained an
appropriate confidentiality agreement from the recipient thereof.
In the event of termination of this Agreement for any reason, the Transfer Agent
agrees to provide the Fund with complete and accurate records and to assist the
Fund in the orderly transfer of accounts and records. Without limiting the
generality of the foregoing, the Transfer Agent agrees upon termination of this
Agreement:
a. to deliver to the Fund computer disks containing the Fund's accounts
and records in machine readable form together with such record layouts
and additional information as may be necessary to enable the Fund to
utilize the information therein;
b. to cooperate with the Fund and any successor transfer agent in the
interpretation of the Fund's accounts and records; and
c. to reimburse the Fund its reasonable costs arising out of any error,
omission, inaccuracy or other deficiency in the Fund's accounts and
records which occurred during the term of this Agreement which arise
from the negligence or other error of the Transfer Agent as long as
claim for such reimbursement is made within 90.days of termination.
Section 31.
- -----------
The practices and procedures of the Transfer Agent and the Fund set forth in the
Agreement, or any other terms or conditions of this Agreement, may be altered or
modified from time to time as may be mutually agreed by the parties to this
Agreement. In special cases the parties hereto may adopt in writing such
procedures as may be
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<PAGE>
appropriate or practical under the circumstances, and the Transfer Agent may
conclusively rely on the determination of the Fund that any special procedure
which has been approved by the Fund does not conflict with or violate any
requirements of its Articles of Incorporation, By-Laws or Prospectus, or any
rule, regulation or requirement of any regulatory body.
Section 32.
- -----------
The Fund shall file with the Transfer Agent a certified copy of each resolution
of its Board of Directors authorizing the execution of Written Instructions or
the transmittal of Oral Instructions, as provided in the Custodian Agreement.
The following additional terms, for purposes of this Agreement or any amendment
or supplement thereto, shall have the meanings herein specified unless the
context otherwise requires:
Plan: The term Plan shall include such investment plan, dividends or capital
gains reinvestment plans, systematic withdrawal plans or other types of
plans set forth in the then currently effective prospectus of the Fund,
including any qualified retirement plan which is a Shareholder of the
Fund, in form acceptable to the Transfer Agent, which the Fund may from
time to time adopt and make available to its Shareholders, including plans
or accounts by individuals or corporations. All Planholders are
Shareholders, who use a specific plan or service not used by all
Shareholders as a whole.
Administrator: The term Administrator of a Plan means the Transfer Agent solely
in its capacity as agent for the performance of those retirement plan
tasks which can be performed on a group or mass basis by the Transfer
Agent's systems. It does not include certain corporate retirement plan
tasks that are often performed on an individual basis, such as preparing
Summary Plan Descriptions and/or preparing IRS Form 5500.
Section 33.
- -----------
This Agreement may be amended from time to time by a supplemental agreement
executed by the Fund and the Transfer Agent.
Section 34.
- -----------
Either the Fund or the Transfer Agent may give 60 days, written notice to the
other of the termination of this Agreement, such termination to take effect at
the time specified in the notice; provided, however, the obligations set forth
in Sections 27, 29, 30, 36, and 37 and, for the fiscal year of the Fund in which
termination occurs, Sections 21 and 22, shall survive such termination, unless
satisfied.
-15-
<PAGE>
Section 35.
- -----------
Any notice or other communication required by or permitted to be given in
connection with this Agreement shall be in writing, and shall be delivered in
person or sent by first class mail, postage prepaid, to the respective parties
as follows:
If to the Fund:
Armstrong Associates, Inc.
Attn: Secretary
750 North St. Paul
Suite 1300, LB 13
Dallas, Texas 75201
If to the Transfer Agent:
Portfolios, Inc.
750 North St. Paul
Suite 1300, LB 13
Dallas, Texas 75201
Section 36.
- -----------
The Transfer Agent and the Fund each represent and warrant to the other as to
itself that all actions required by their respective directors or shareholders
has been taken to authorize the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby; the execution and delivery
of this Agreement and consummation of the transactions contemplated hereby do
not contravene any provision of their respective charter or by-laws or of any
laws, regulations or orders or any government or agency thereof to which it is
subject; do not constitute the violation or breach of any agreement or
understanding to which it is a party or by which it is bound; and upon its
execution and delivery, this Agreement shall be binding and enforceable against
it in accordance with its terms.
Section 37.
- -----------
The Transfer Agent may from time to time, with the written consent of the Fund,
delegate some or all of its duties hereunder to others, who shall perform such
functions as the agent of the Transfer Agent. To the extent of such delegation,
the term "the Transfer Agent' in this Agreement shall be deemed to refer to both
the Transfer Agent and to its designee or to either of them, as the context may
indicate. In each provision of this Agreement fixing or limiting the liabilities
or the delegations of the Transfer Agent, or Providing for the liability
indemnification or protection of the Transfer Agent, the term "the Transfer
Agent" shall include the Transfer Agent's designee. The Transfer Agent shall not
be relieved of any liabilities or obligation under the Agreement in connection
with such delegation of duties, shall be responsible to
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<PAGE>
supervise and assure that any such designee properly performs the duties
delegated to it, and shall be responsible for the performance of the designee as
though the Transfer Agent had, itself, performed the duties so delegated.
Section 38.
- -----------
This Agreement may be executed in two or more counterparts, each of which when
so executed shall be deemed to be an original, but such counterparts shall
together constitute but one and the same instrument.
Section 39.
- -----------
This Agreement shall extend to and shall be binding upon the parties hereto and
their respective successors and assigns; provided, however, that this Agreement
shall not be assignable by the Fund without the written consent of the Transfer
Agent or by the Transfer Agent without the written consent of the Fund,
authorized or approved by a resolution of its Board of Directors.
Section 40.
- -----------
This Agreement constitutes the full and complete agreement of the parties hereto
with respect to the subject matter hereof and supersedes all prior agreements or
understandings between the parties.
Section 41.
- -----------
Whenever pronouns are used herein, they shall be interpreted in the neuter,
masculine, feminine, singular or plural as the context may require.
Section 42.
- -----------
Except where specific time limits are herein provided, no delay on the part of
any party hereto in exercising any power or right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any power or right
hereunder preclude other or further exercise thereof or the exercise of any
8ther power or right. No waiver shall be enforceable against any party hereto
unless in writing, signed by the party against whom such waiver is claimed, and
shall be limited solely to the one event.
Section 43.
- -----------
This Agreement shall be governed by, and construed in accordance with, the
internal laws of the State of Texas, without giving effect to the principles of
conflicts of law.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by their respective duly authorized officers.
ARMSTRONG ASSOCIATES, INC,
By /s/ Candace L. King
---------------------------
PORTFOLIOS, INC.
By /s/ C.K. Lawson
---------------------------
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<PAGE>
Schedule A - FEE SCHEDULE
Attached to and part of Transfer Agent Agreement
Dated May 17, 1995, Effective January 1, 1995
Transfer Agent, Dividend Disbursing Agent,
Shareholder Accounting Agent
Fees and Expenses
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A. Basic Fee: $1,000 per month for the first 12 months, $700 per month
thereafter. Fees can be amended by mutual consent of the Fund, as
evidenced by resolution of its Board, and the Transfer Agent.
B. Expenses: The basic fee excludes all out of pocket costs, including,
without limitations: costs of forms, statements, envelopes, postage,
shipping, telephone, insurance, legal fees, statement microfiche
copies. These costs are billed separately.
Basic Services:
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Opening new accounts.
Processing all payments.
Issuing and canceling certificates.
Processing partial and complete redemptions.
Regular and legal transfers of accounts.
Mailing shareholder reports.
Processing dividends and distributions, including withholding obligations.
Confirmation of all transactions as provided by the terms of each shareholder's
account.
Retirement account reporting.
Account Maintenance:
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Maintaining shareholder records of certificates and whole and fractional
unissued shares.
Changing shareholders' addresses.
Daily reports on numbers of shares, accounts.
Addressing and tabulating annual proxy cards.
Supplying shareholder lists as necessary.
Preparation of shareholder Federal Tax Information Forms.
Replying to shareholder telephone calls and correspondence other than that for
Fund performance, Fund information, or Fund-related inquiries.
-19-
ADMINISTRATIVE SERVICES AGREEMENT
BETWEEN
ARMSTRONG ASSOCIATES, INC.
AND
PORTFOLIOS, INC.
THIS ADMINISTRATIVE SERVICES AGREEMENT is made this 24th day of October,
1985 by and between Armstrong Associates, Inc., a Texas corporation (the
"Fund"), and Portfolios, Inc., a Texas corporation ("Portfolios"):
WITNESSETH:
WHEREAS, the Fund is engaged in business as an open-end investment company
registered under the Investment Company Act of 1940, as amended (the "Act");
WHEREAS, Portfolios is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and engages in the business of
providing investment advisory services to the Fund and others; and
WHEREAS, the Fund desires to retain Portfolios to render certain additional
services in the manner and on the terms and conditions hereinafter set forth;
and
WHEREAS, Portfolios desires to be retained to perform such additional
services on said terms and conditions:
NOW, THEREFORE, for and in consideration of the mutual promises and
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. SERVICES. The Fund hereby retains Portfolios to provide to the Fund such
accounting and bookkeeping services and functions (the "Services") as are
reasonably necessary for the operation of the Fund, including the preparation
and maintenance of the following books, records and other documents: (a)
journals containing itemized daily records in detail of all purchases and sales
of securities, receipts and deliveries of securities, all receipts and
disbursements of cash and all other debits and credits; (b) general and
auxiliary ledgers reflecting all asset, liability, reserve, capital, income and
expense accounts; and (c) a record of the proof of money balances in all ledger
accounts maintained pursuant to this Agreement. The foregoing books and records
shall be maintained by Portfolios in accordance with and for the time periods
specified by applicable rules and regulations, including Rules 3la-1 and 3la-2
under the Act. All such books and records shall be the property of the Fund and,
upon request therefor, Portfolios shall surrender to the Fund promptly such of
the books and records so requested.
<PAGE>
2. INFORMATION FROM FUND. The Fund will, from time to time, furnish or
otherwise make available to Portfolios such information relating to the business
and affairs of the Fund as Portfolios may reasonably require in order to
discharge its duties and obligations hereunder.
3. COMPENSATION. For the Services to be rendered as provided above, the
Fund shall pay to Portfolios a cash fee at the annual rate of $16,000, payable
in equal monthly installments on the last day of each month. If Portfolios shall
serve for less than the whole of any month, the compensation to Portfolios shall
be prorated.
4. ALLOCATION OF CHARGES AND EXPENSES. Portfolios shall be responsible for
the compensation of its personnel, and for the costs of its office facilities
and equipment, employed in performing the Services. The Fund shall be
responsible for, and shall pay, all the other expenses associated with its
operations. Portfolios may arrange on behalf of the Fund to obtain data
processing, legal, auditing and consulting services reasonably necessary in
connection with the performance of the Services, and the Fund shall be
financially responsible for the cost of such services.
5. INSPECTION. Portfolios will permit representatives of the Fund,
including the Fund's independent auditors, to have reasonable assess to the
personnel and records of Portfolios in order to enable such representatives to
monitor the quality of services being provided pursuant to this Agreement. In
addition, Portfolios shall promptly deliver to the Board of Directors of the
Fund such information as may reasonably be requested from time to time to permit
the Board of Directors to make an informed determination regarding continuation
of this Agreement.
6. ACTIVITIES OF PORTFOLIOS. The services of Portfolios to the Fund are not
deemed to be exclusive. Portfolios shall be free to engage in any other
business, to render similar services to others and to provide other services to
the Fund for separate and additional consideration.
7. DURATION, TERMINATION AND AMENDMENT OF THIS AGREEMENT. This Agreement
shall become effective on November 1, 1985 and shall continue in effect for two
years from such date, and thereafter, but only so long as such continuance is
specifically approved at least annually (i) by the vote of a majority of the
directors of the Fund who are not parties to this Agreement or interested
persons (as defined in the Act) of the Fund or Portfolios, and (ii) by the Board
or by a vote of a majority of the outstanding voting securities of the Fund.
This Agreement may be terminated by Portfolios at any time without penalty on 60
days' written notice, and may be terminated at any time without penalty by the
Board or by the vote of a majority of the outstanding voting securities of the
Fund on 60 days' written notice. This Agreement may be amended by an instrument
in writing executed by the parties hereto and approved in the same manner as the
continuance hereof without the approval of the shareholders of the Fund, and it
shall automatically terminate in the event of its transfer or assignment.
8. INVESTMENT COMPANY ACT. This Agreement is made subject to the provisions
of the Act.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Administrative
Services Agreement to be executed as of the date first above written.
ARMSTRONG ASSOCIATES, INC.
By /s/ C.K. Lawson
----------------------------
President
PORTFOLIOS, INC.
By /s/ Candace L. King
----------------------------
Vice President
-3-
[Jackson Walker L.L.P. Letterhead)
October 27, 1997
Armstrong Associates, Inc.
750 North St. Paul, Suite 1300
Dallas, Texas 75201
Re: Armstrong Associates, Inc.
Gentlemen:
We have acted as counsel for Armstrong Associates, Inc., a Texas
corporation (the "Company"), solely for purposes of rendering this opinion in
connection with the Company's registration of an indefinite number of shares
("Shares") of its Common Stock, par value $ 1.00 per share, pursuant to
Post-Effective Amendment No. 42 to its Registration Statement on Form N- IA (No.
2-27539) (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Act"), and Post-Effective Amendment No. 28 to the Registration
Statement under the Investment company Act of 1940, as amended. As such counsel
we have examined and relied upon the originals, or copies identified to our
satisfaction, of such corporate records, documents, certificates and other
instruments that in our judgment are necessary or appropriate to enable us to
render the opinion hereinbelow set forth.
We are of the following opinion:
(1) The company is a corporation duly incorporated and validly existing
under the laws of the State of Texas with authorized capital stock consisting
solely of 6,000,000 shares of Common Stock, par value of $ 1. 00 per share.
(2) When payment, in an amount per Share equal to the net asset value per
Share of the Company calculated in the manner described in the Registration
Statement, but in no event in an amount less than $1.00 per Share, has been
received by the company for the sale of Shares, such Shares, up to a maximum
aggregate of 6,000,000 Shares, when issued, will be validly issued, fully-paid
and non-assessable.
We consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/ Jackson Walker L.L.P.
