MAY 17, 1995
AMENDED MAY 26, 2000
ARMSTRONG ASSOCIATES, INC.
PORTFOLIOS, INC.
CODE OF ETHICS
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The following Code of Ethics (this "Code") that was adopted as of May 17,
1995 and amended May 26, 2000, by the respective Boards of Directors of
Armstrong Associates, Inc., a Texas corporation (the "Fund") which is registered
as an open-end investment company under the Investment Company Act, and
Portfolios, Inc., a Texas corporation (the "Adviser") which is registered as an
investment adviser under the Investment Advisers Act, establishes standards of
conduct and reporting procedures with respect to securities transactions by
their respective directors, officers and employees. This Code is intended to
further the compliance by the Adviser and the Fund with their respective duties
under the Investment Advisers Act (including Rule 204-2 thereunder), the
Investment Company Act (including Rule 17j-1 thereunder) and the Insider Trading
and Securities Fraud Enforcement Act.
1. DEFINITIONS.
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(A) CERTAIN DEFINED TERMS. As used in this Code, the following terms shall
have the respective meanings set forth below.
"Access Person"means:
(i) any director, officer or employee of the Adviser or the Fund
who, in connection with his regular functions or duties, makes,
participates in or obtains current information regarding
purchases or sales of Securities by the Adviser for any Account,
or whose functions relate to the making of purchases or sales or
recommendations with respect thereto, and
(ii) any natural Person in a Control relationship to the Adviser or
the Fund who obtains current information concerning purchases or
sales of Securities by any Account or Securities Being
Considered for Purchase or Sale by any Account; provided,
however, that no Person shall be deemed an Access Person by
reason of obtaining such current information through:
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(a) reports to the Fund's shareholders or to an Account advised
by the Adviser for such Person, for members of such Person's
immediate family or for any other Person with respect to
which such Person has or shares, directly or indirectly, the
Investment Power,
(b) filings with governmental agencies,
(c) sales literature,
(d) portfolio summaries made generally available to Persons
selling shares of the Fund or
(e) other public documents.
"Account" means the Fund or any account of any other Person for which the
Adviser has been engaged to recommend the purchase or sale of Securities.
"Adviser" means Portfolios, Inc.
"Annual Holdings Report" is an annual report to the Secretary by all
"Access Persons " as of June 30 of each year detailing all covered security
holdings and related brokerage accounts. (Form Attached)
"Being Considered for Purchase or Sale" occurs:
(i) when there has been communication of a decision to purchase or
sell a Security for any Account or that such a decision is
seriously being considered for any Account, and
(ii) with respect to the Person making the decision, when such Person
seriously considers making such a decision for any Account.
"Beneficial Owner" means any person who directly or indirectly, through any
contract, arrangement, understanding, relationship or otherwise, has or shares a
direct or indirect pecuniary interest in the Securities, subject to the
following:
(i) The term "pecuniary interest" in any class of Securities shall
mean the opportunity, directly or indirectly, to profit or share
in any profit derived from a transaction in the subject
Securities.
(ii) The term "indirect pecuniary interest" in any class of
Securities shall include, but not be limited to:
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(a) Securities held by members of an individual's immediate
family sharing the same household;
(b) A general partner's proportionate interest in the portfolio
Securities held by a general or limited partnership;
(c) A Person's right to dividends that is separated or separable
from the underlying Securities (otherwise, a right to
dividends alone shall not represent a pecuniary interest in
the Securities);
(d) A Person's interest in Securities held by a trust; and
(e) A Person's right to acquire Equity Securities through the
exercise or conversion of any warrant, option or convertible
Security, whether or not presently exercisable.
(iii) A shareholder shall not be deemed to have a pecuniary interest
in the portfolio Securities held by a corporation or similar
entity in which the Person owns Securities if the shareholder is
not a Controlling shareholder of the entity and does not have or
share investment Control over the entity's portfolio.
The foregoing definition of Beneficial Owner shall be interpreted in the
same manner as it would be in determining whether a Person is subject to
the provisions of Rule 16a- 1(a)(2) under the Securities Exchange Act of
1934, as amended.
"Code" has the meaning specified in the first paragraph of this Code.
"Control" means the power to exercise a controlling influence over the
management or policies of a Person unless such power is solely the result of an
official position (e.g., as a director or officer) with such Person. Any Person
who owns beneficially, either directly or through one or more controlled
Persons, more than 25 per centum of the voting securities of a Person shall be
presumed to control such Person. Any person who does not own more than 25 per
centum of the voting securities of any Person shall be presumed not to Control
such Person. A natural person shall be presumed not to be a Controlled Person
within the meaning of this definition.
"Covered Securities"includes all Securities except the following:
(i) Direct obligations of the Government of the United States;
(ii) Bankers' acceptances, bank certificates of deposit, commercial
paper and high quality short-term debt instruments, including
repurchase agreements; and
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(iii) Shares issued by open-end Funds.
"Equity Security" means any stock or similar Security; or any Security
convertible, with or without consideration, into such a Security, or carrying
any warrant or right to subscribe to or purchase such a Security; or any such
warrant or right.
"Excluded Account" means an account of which an Access Person may be a
Beneficial Owner, but as to which either:
(i) the Access Person does not have any Investment Power or
(ii) the Adviser is engaged as to act as investment adviser and
maintains records of all of its Securities transactions.
"Fund" means Armstrong Associates, Inc.
"Initial Holdings Report" is a report to be filed by all new "Access
Persons " to be filed within 10 days of becoming an Access Person detailing all
covered security holdings and related brokerage accounts. (Form Attached)
"Initial Public Offering" (IPO) means an offering of securities registered
under the Securities Act of 1933, the issuer of which, immediately before the
registration, was not subject to the reporting requirements of sections 13 or
15(d) of the Securities Exchange Act of 1934.
"Investment Advisers Act" means the Investment Advisers Act of 1940.
"Investment Company Act" means the Investment Company Act of 1940.
"Investment Power" includes the power to acquire or dispose of any Security
or to direct the acquisition or disposition of any Security.
"Limited Offering" means an offering that is exempt from registration under
the Securities Act of 1933.
"Material Information" means information which a reasonable investor would
consider it important in making his or her investment decisions, or information
that is reasonably likely to have a substantial effect of the price of a
company's securities; and it includes, but is not limited to, annual or
quarterly financial results; a significant change in earnings forecasts;
significant writedowns of assets or additions to reserves; significant
litigation; public offerings; negotiations or agreements regarding significant
acquisitions, divestitures or business combinations; a change in dividend
policy; and major management changes.
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"Nonpublic Information" means information which has not been effectively
communicated to the market place.
"Person" means an individual, partnership, corporation, limited liability
company, limited liability partnership, business trust, joint stock company,
trust, unincorporated association, joint venture or other entity, or a
government or any political subdivision or agency thereof.
"Private Placement" is a security offering that is not registered under the
Securities Act of 1933.
"Public Company" means a Person whose Securities are listed on a national
securities exchange or are traded in NASDAQ National Market System.
"Public Offering "means an offering of securities registered under the
Securities Act of 1933.
"President" means the president of Portfolios, Inc. and Armstrong
Associates, Inc.
"Secretary" means the secretary of Portfolios, Inc. and Armstrong
Associates, Inc.
"Securities" means any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, certificate of interest or participation in any profit
sharing agreement, collateral- trust certificate, preorganization certificate or
subscription, transferable share, investment contract, voting-trust certificate,
certificate of deposit for a security, fractional undivided interest in oil, gas
or other mineral rights, any put, call, straddle, option, or privilege on any
security (including a certificate of deposit) or on any group or index of
securities (including any interest therein or based on the value thereof), or
any put, call, straddle option or privilege entered into on a national
securities exchange relating to a foreign currency, or in general, any
instrument commonly known as a "security"; or any certificate of interest or
participation in, temporary or interim certificate for, receipt for, guarantee
of or warrant or right to subscribe to or purchase any of the foregoing.
"Security Transaction Request" is the form used to request pre-clearance of
transactions involving "Covered Securities". (Form Attached)
(B) MISCELLANEOUS. Within this Code,
(i) words of any gender include any other gender,
(ii) words in the singular number include the plural, unless the
context otherwise requires, and
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(iii) the words "hereof," "herein" and "hereunder" and words of
similar import when used in this Code shall refer to this Code
as a whole and not to any particular provision of this Code.
2. STATEMENT OF GENERAL PRINCIPLES.
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(A) Each director, officer and employee of the Adviser has the duty at all
times to place the interest of the Adviser's clients (including the
Fund) before his personal transactional interests in Securities.
(B) Each director, officer and employee of the Fund has the duty at all
times to place the interest of the Fund's shareholders before his
personal transactional interests in Securities.
(C) Each director, officer or employee of the Adviser or the Fund shall:
(i) conduct all personal Securities transactions consistently with
this Code and in such a manner as to avoid any actual or
potential conflict of interest or any abuse of an individual's
position of trust and responsibility, and
(ii) not take inappropriate advantage of his position.
3. NONPUBLIC INFORMATION RESTRICTIONS.
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(A) Each director, officer and employee of the Adviser or the Fund has a
duty to maintain the confidential nature of any Nonpublic Information
received through his association with the Adviser or the Fund and not
to disclose same without the prior consent of the Adviser or the Fund,
as the case may be.
(B) Each director, officer or employee of the Adviser or the Fund shall
not effect any transaction in any Security while in possession of any
Nonpublic Information which is Material in respect of that Security,
whether for the benefit of any Account or for any account of which he
is a Beneficial Owner, and shall not in any way aid or facilitate any
other Person effecting any transaction on the basis of such Nonpublic
Information.
4. SUBSTANTIVE RESTRICTIONS.
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(A) No Access Person shall purchase or sell (or otherwise acquire or
dispose of), directly or indirectly, any Security which to his actual
knowledge:
(i) Is Being Considered for Purchase or Sale by any Account; or
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(ii) Is Being purchased or sold by any Account; or
(iii) Has been purchased or sold by any Account within the preceding
fifteen (15) calendar days;
(B) No Access Persons shall unnecessarily discuss securities covered by
4(A) beyond the degree necessary to perform his business
responsibilities.
(C) The restrictions in 4(A) and (B) shall not apply to:
(i) Transactions in any of the following:
(a) Direct obligations of the Government of the United States;
(b) Bankers' acceptances, bank certificates of deposit,
commercial paper and high quality short-term debt
instruments, including repurchase agreements; and
(c) Shares issued by open-end Funds.
(ii) Transactions in connection with a stock dividend or split, a
tender offer, merger, consolidation, share exchange or other
business combination or which are non- volitional on the part of
either the Access Person or the Account;
(iii) Acquisitions which are part of an automatic dividend
reinvestment plan;
(iv) Acquisitions effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of its Securities, to
the extent such rights were acquired from such issuer, and sales
of such rights so acquired.
(v) Acquisitions and dispositions effected by another Person for any
Excluded Account; or
(vi) Gifts of Securities to or for the benefit of family members or
religious, educational or other charitable organizations.
(D) No Access Person shall acquire any Equity Security in any Public
Offering for Equity Securities of that issuer.
(E) No Access Person may purchase any Covered Security of any company in
any transaction which is exempt from, or has not been registered
under, the Securities Act of 1933 ("Limited Offerings" and "Private
Placements") without the prior written approval of the President.
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(F) No Access Person shall receive any gift of money or of any item of
more than de minimis value from any Person who acts as a broker or
dealer for the Fund.
(G) No Access Person shall serve as a director of any Public Company
without the prior consent of the respective Boards of Directors of the
Adviser and the Fund.
5. PRE-CLEARANCE OF SECURITY TRANSACTIONS. No Access Person shall effect any
transaction in any Covered Security of which the Access Person is or will be a
Beneficial Owner without having previously notified, and received approval of,
the President or Secretary by means of a Security Transaction Request
substantially in the form attached to this Code; provided that the foregoing is
not applicable to any transaction permitted in Section 4(C).
6. SECURITY TRANSACTIONS REPORTING REQUIREMENTS.
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(A) Each Access Person shall advise the Secretary of each Securities
brokerage account which includes Covered Securities of which he is a
Beneficial Owner at any broker, dealer or bank (other than an Excluded
Account) and cause it to be forwarded to the Secretary copies of all
confirmations in Covered Securities of Public Companies and periodic
account statements which it sends to the Access Person.
(B) Every Access Person shall report to the Secretary the information
described in Section 6(C) of this Code with respect to each
transaction in any Covered Security in which such Access Person is, or
by reason of such transaction becomes, a Beneficial Owner of the
Security; provided, however, that an Access Person shall not be
required to make a report with respect to transactions effected for
any Excluded Account.
(C) Transaction information is to be received by the Secretary on a timely
basis (generally within 10 days of a transaction) on all transactions.
(i) An Access Person shall not be required to make a report with
respect to any transaction where the report would duplicate
information in a confirmation or statement furnished pursuant to
Section 6(A).
(ii) The transaction information required is:
(a) The date of the transaction, the title and the number of
shares or the principal amount of each Security involved;
(b) The nature of the transaction (i.e., purchase, sale or any
other type of acquisition or disposition);
(c) The price at which the transaction was effected; and
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(d) The name of the broker, dealer or bank with or through whom
the transaction was effected.
(D) Any such report pursuant to Section 6(B) may contain a statement that
the report shall not be construed as an admission by the Person making
such report that he has any direct or indirect Beneficial Ownership in
the Security to which the report relates.
(E) In the case of transactions for which the Secretary is or will be a
Beneficial Owner, the information specified above shall be delivered
to the President.
7. INITIAL HOLDINGS REPORT (IHP) AND ANNUAL HOLDING REPORT (AHP) REQUIREMENTS
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(A) Each Access Person shall complete an Annual Holdings Report covering
all applicable investments directly or indirectly beneficially owned.
[See (B) below for exemptions.] The Annual Holdings Report is required
as of June 30 and is to be submitted to the Secretary no later than
July 20.
(B) Investments in open ended investment companies (including Armstrong
Associates and the Vanguard funds), direct obligations of the U.S.
Government, CD's and commercial paper are not required to be included
in the Annual Holdings Report. Also, security transactions in any
account over which the Access Person has no direct or indirect
influence or control are excluded from the Annual Holdings Report
requirements.
(C) All new Access Persons are required to provide an Initial Holdings
Report within ten (10) days of becoming an Access Person.
(F) Initial and Annual Holdings Reports are to include the following
information:
(i) The name and class of the security held
(ii) The number of shares or par value held.
(iii) The name and address of the broker/bank/dealer where the
securities are held and the account styling and number.
(iv) The "as of" date for the information reported and the date the
report is submitted.
8. REVIEW, RECORDKEEPING AND REPORTING RESPONSIBILITIES
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(A) The Secretary is responsible for insuring that Security Transaction
Requests are properly submitted, reviewed and acted upon.
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(B) Records of all transaction requests and related documentation are to
be maintained as part of Portfolios records.
(C) All Annual Holdings Reports and Initial Holdings Reports are to be
reviewed promptly by both the Secretary and the President and made a
part of Portfolios records.
(D) For the consideration of Board of Directors of the Fund, the President
shall annually:
(i) Provide a written report to the Board of Directors of the Fund
that describes issues that arose during the previous year under
the Code of Ethics or procedures including, but not limited to,
information about material Code or procedure violations and
sanctions imposed in response to those material violations.
(ii) Certify to the Fund's Board of Directors that procedures
reasonably necessary to prevent its Access Persons from
violating its Code of Ethics have been adopted.
9. QUESTIONS; INTERPRETATIONS. Questions regarding or requests for
interpretations of this Code should be directed to the Secretary or the
President, who shall have the right to consult with Counsel with respect
thereto.
10. SANCTIONS. Upon discovering a violation of this Code, the Board of
Directors of the Adviser or the Fund, as the case may be, may impose such
sanctions as it deems appropriate, including, among other things, a letter of
censure or suspension or termination of the employment of the violator or
reporting the violation to the Securities and Exchange Commission.
Attachments: Initial Holdings Report
Annual Holdings Report
Security Transaction Request
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INITIAL HOLDINGS REPORT OF INVESTMENTS AS OF
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1. Name:
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2. Holding Firm Name and Address:
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3. Account Number & Styling:
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4. Total Pages Submitted:
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PAR VALUE/SHARES SECURITY NAME & CLASS
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Reviewed by Date Submitted by
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Reviewed by Date
NOTE: If there are multiple accounts, list each separately and indicate total
pages submitted on item 4 above.
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ANNUAL HOLDINGS REPORT OF INVESTMENTS AS OF JUNE 30,
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1. Name:
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2. Holding Firm Name and Address:
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3. Account Number & Styling:
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4. Total Pages Submitted:
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PAR VALUE/SHARES SECURITY NAME & CLASS
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Reviewed by Date Submitted by
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Reviewed by Date
Note: 1. If there are multiple accounts, list each separately and indicate
total pages submitted on item 4 above.
2. To be submitted no later than July 20.
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ARMSTRONG ASSOCIATES, INC.
PORTFOLIOS, INC.
SECURITY TRANSACTION REQUEST
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Access Person Name:
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TRANSACTION REQUESTED
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Purchase/Sale Shares/Par Value Security
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APPROVED / DISAPPROVED
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Submitted by and Date Reviewed by and Date
Please Note: 1. ALL TRADES MUST BE APPROVED BY C. K. LAWSON OR CANDACE
=========== KING.
2. SUBMIT A SEPARATE REQUEST FOR EACH TRANSACTION
REQUESTED.
3. IF TRADE IS NOT EXECUTED ON DATE OF APPROVAL, IT MUST
BE RESUBMITTED.
4. BE SURE AND PUT PORTFOLIOS, INC. ON FOR COPIES OF
BROKERAGE CONFIRMATIONS.
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