EXHIBIT 99.B8a
CUSTODIAN CONTRACT
BETWEEN
SM&R CAPITAL FUNDS, INC.
AND
SECURITIES MANAGEMENT AND RESEARCH, INC.
THIS CUSTODIAN CONTRACT (the "Agreement") is made and entered into this 1st
day of July, 1993, by and between SM&R CAPITAL FUNDS, INC., a Maryland
corporation hereinafter referred to as the "Fund", and SECURITIES MANAGEMENT AND
RESEARCH, INC., a Florida corporation hereinafter referred to as the
"Custodian".
The Fund is a series fund and currently has three series: the American
National Government Income Fund Series (the "Government Income Series"), the
American National Primary Fund Series (the "Primary Series") and the American
National Tax Free Fund Series (the "Tax Free Series"). The Government Income
Series, Primary Series and the Tax Free Series (individually and collectively,
the "Series") each pursue different investment objectives through separate
investment policies.
SM&R is engaged in the business of providing custodian services to
investment companies and desires to provide such services to the Fund and to
each of its Series.
In consideration of the mutual covenants contained in this Agreement and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Custodian and the Fund hereby agree as follows:
1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT.
The Fund hereby employs the Custodian as the custodian of its assets
pursuant to the provisions of the Articles of Incorporation. The Fund agrees to
deliver to the Custodian all securities and cash owned by it, and all payments
of income, with respect to all securities owned by the Fund from time to time,
and the cash consideration received by it for such new or treasury shares of
capital stock, $0.01 par value ("Shares") of the Fund as may be issued or sold
from time to time. The Custodian shall not be responsible for any property of
the Fund held or received by the Fund and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Section 2.17),
the Custodian shall from time to time employ one or more sub-custodians, but
only in accordance with an applicable vote by the Board of Directors of the
Fund, and provided that the Custodian shall have no more or less responsibility
or liability to the Fund on account of any actions or omissions of any sub-
custodian so employed than any such sub-custodian has to the Custodian. The
Fund acknowledges and agrees that the Custodian shall enter into a sub-custodian
agreement with The Xxxxx National Bank of Galveston, having its principal place
of business at 0000 Xxxxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxx 00000.
2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY
THE CUSTODIAN.
2.1 HOLDING SECURITIES. The Custodian shall hold and physically segregate
for the account of the Fund all non- cash property, including all securities
owned by the Fund, other than securities which are maintained pursuant to
Section 2.12 in a clearing agency which acts as a securities depository or in a
book-entry system authorized by the U.S. Department of the Treasury,
collectively referred to herein as "Securities System".
2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver
securities owned by the Fund held by the Custodian or in a Securities System
account of the Custodian only upon receipt of Proper Instructions, which may be
continuing instructions when deemed appropriate by the parties, and only in the
following cases:
(1) Upon sale of such securities for the account of the Fund and
receipt of payment therefor;
(2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Fund;
(3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.12 hereof;
(4) To the depository agent in connection with tender or other
similar offers for portfolio securities of the Fund;
(5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided, that in
any such case, the cash or other consideration is to be delivered to the
Custodian;
(6) To the issuer thereof, or its agent, for transfer into the name
of the Fund or into the name of any nominee or nominees of the Custodian or
into the name or nominee name of any agent appointed pursuant to Section
2.11 or into the name or nominee name of any sub-custodian appointed
pursuant to Article 1; or for exchange for a different number of bonds,
certificates or other evidence representing the same aggregate face amount
or number of units; provided, that in any such case, the new securities are
to be delivered to the Custodian;
(7) Upon the sale of such securities for the account of the Fund, to
the broker or its clearing agent, against a receipt, for examination in
accordance with "street delivery" custom; PROVIDED that in any such case,
the Custodian shall have no responsibility or liability for any loss
arising from the delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's own negligence or
willful misconduct;
(8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer of such securities, or pursuant to provisions for
conversion contained in such securities, or pursuant to any deposit
agreement; PROVIDED, that in any such case, the new securities and cash, if
any, are to be delivered to the Custodian;
(9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or similar
securities or the surrender of interim receipts or temporary securities for
definitive securities; PROVIDED, that in any such case, the new securities
and cash, if any, are to be delivered to the Custodian;
(10) For delivery in connection with any loans of securities made by
the Fund, BUT ONLY against receipt of adequate collateral as agreed upon
from time to time by the Custodian and the Fund, which may be in the form
of cash or obligations issued by the United States government, its agencies
or instrumentalities, except that in connection with any loans for which
collateral is to be credited to the Custodian's account in the book-entry
system authorized by the U.S. Department of the Treasury, the Custodian
will not be held liable or responsible for the delivery of securities owned
by the Fund prior to the receipt of such collateral;
(11) For delivery as security in connection with any borrowings by the
Fund requiring a pledge of assets by the Fund, BUT ONLY against receipt of
amounts borrowed;
(12) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian and a broker-dealer registered under the
Securities Exchange Act of 1934 (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in connection with
transactions by the Fund;
(13) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian, and a Futures Commission Merchant registered
under the Commodity Exchange Act, relating to compliance with the rules of
the Commodity Futures Trading Commission and/or any Contract Market, or any
similar organization or organizations, regarding account deposits in
connection with transactions by the Fund;
(14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to the holders
of Shares in connection with distributions in kind, as may be described
from time to time in the Fund's currently effective prospectus and
statement of additional information ("prospectus"), in satisfaction of
requests by holders of Shares for repurchase or redemption; and
(15) For any other proper corporate purpose, BUT ONLY upon receipt of,
in addition to Proper Instructions, a certified copy of a resolution of the
Board of Directors or of the Executive Committee signed by an officer of
the Fund and certified by the Secretary or an Assistant Secretary,
specifying the securities to be delivered, setting forth the purpose for
which such delivery is to be made, declaring such purposes to be proper
corporate purposes, and naming the person or persons to whom delivery of
such securities shall be made.
2.3 REGISTRATION OF SECURITIES. Securities held by the Custodian (other
than bearer securities) shall be registered in the name of the Fund or in the
name of any nominee of the Fund or of any nominee of the Custodian which nominee
shall be assigned exclusively to the Fund, UNLESS the Fund has authorized in
writing the appointment of a nominee to
be used in common with other registered investment companies having the same
investment adviser as the Fund, or in the name or nominee name of any agent
appointed pursuant to Section 2.11 or in the name or nominee name of any
sub-custodian appointed pursuant to Article 1. All securities accepted by
the Custodian on behalf of the Fund under the terms of this Contract shall be
in "street name" or other good delivery form.
2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank
account or accounts in the name of the Fund, subject only to draft or order by
the Custodian acting pursuant to the terms of this Contract, and shall hold in
such account or accounts, subject to the provisions hereof, all cash received by
it from or for the account of the Fund, other than cash maintained by the Fund
in a bank account established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940. Funds held by the Custodian for the Fund may be
deposited by it to its credit as Custodian in the Banking Department of the
Custodian or in such other banks or trust companies as it may in its discretion
deem necessary or desirable; PROVIDED, however, that every such bank or trust
company shall be qualified to act as a custodian under the Investment Company
Act of 1940 and that each such bank or trust company and the funds to be
deposited with each such bank or trust company shall be approved by vote of a
majority of the Board of Directors of the Fund. Such funds shall be deposited
by the Custodian in its capacity as Custodian and shall be withdrawable by the
Custodian only in that capacity.
2.5 PAYMENT FOR SHARES. The Custodian shall receive from the distributor
for the Fund's Shares or from the Transfer Agent of the Fund and deposit into
the Fund's account such payments as are received for Shares of the Fund issued
or sold from time to time by the Fund. The Custodian will provide timely
notification to the Fund and the Transfer Agent of any receipt by it of payments
for Shares of the Fund.
2.6 INVESTMENT AND AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement
between the Fund and the Custodian, the Custodian shall, upon the receipt of
Proper Instructions,
(1) invest in such instruments as may be set forth in such
instructions on the same day as received all federal funds received after a
time agreed upon between the Custodian and the Fund; and
(2) make federal funds available to the Fund as of specified times
agreed upon from time to time by the Fund and the Custodian in the amount
of checks received in payment for Shares of the Fund which are deposited
into the Fund's account.
2.7 COLLECTION OF INCOME. The Custodian shall collect on a timely basis
all income and other payments with respect to registered securities held
hereunder to which the Fund shall be entitled either by law or pursuant to
custom in the securities business, and shall collect on a timely basis all
income and other payments with respect to bearer securities if, on the date of
payment by the issuer, such securities are held by the Custodian or agent
thereof and shall credit such income, as collected, to the Fund's custodian
account. Without limiting the generality of the foregoing, the Custodian shall
detach and present for payment all coupons and other income items requiring
presentation as and when they become due and shall collect interest when due on
securities held hereunder. Income due the Fund on securities loaned pursuant to
the provisions of Section 2.2(10) shall be the responsibility of the Fund. The
Custodian will have no duty or responsibility in connection therewith, other
than to provide the Fund with such information or data as may be necessary to
assist the Fund in arranging for the timely delivery to the Custodian of the
income to which the Fund is properly entitled.
2.8 PAYMENT OF FUND MONEY. Upon receipt of Proper Instructions, which may
continuing instructions when deemed appropriate by the parties, the Custodian
shall pay out monies of the Fund in the following cases only:
(1) Upon the purchase of securities, futures contracts or options on
futures contracts for the account of the Fund but only (a) against the
delivery of such securities, or evidence of title to futures contracts or
options on futures contracts, to the Custodian (or any bank, banking firm
or trust company doing business in the United States or abroad which is
qualified under the Investment Company Act of 1940, as amended, to act as a
custodian and had been designated by the Custodian as its agent for this
purpose) registered in the name of the Fund or in the name of a nominee of
the Custodian referred to in Section 2.3 hereof or in proper form for
transfer; (b) in the case of a purchase effected through a Securities
System, in accordance with the conditions set forth in Section 2.12 hereof;
or (c) in the case of repurchase agreements entered into between the Fund
and the Custodian, or another bank, or a broker-dealer which is a member of
NASD, (i) against delivery of the securities either in certificate form or
through an entry crediting the Custodian's account at the Federal Reserve
Bank with such securities or (ii) against delivery of the receipt
evidencing purchase by the Fund of securities owned by the Custodian along
with written evidence of the agreement by the Custodian to repurchase such
securities from the Fund;
(2) In connection with conversion, exchange or surrender of
securities owned by the Fund as set forth in Section 2.2 hereof;
(3) For the redemption or repurchase of Shares issued by the Fund as
set forth in Section 2.10 hereof;
(4) For the payment of any expense or liability incurred by the Fund,
including, but not limited to, the following payments for the account of
the Fund: interest, taxes, management, accounting, transfer agent and
legal fees, and operating expenses of the Fund whether or not such expenses
are to be in whole or part capitalized or treated as deferred expenses;
(5) For the payment of any dividends declared pursuant to the
governing documents of the Fund;
(6) For payment of the amount of dividends received in respect of
securities sold short;
(7) For any other proper purpose, BUT ONLY upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of the
Board of Directors or of the Executive Committee of the Fund signed by an
officer of the Fund and certified by its Secretary or an Assistant
Secretary, specifying the amount of such payment, setting forth the purpose
for which such payment is to be made, declaring such purpose to be a proper
purpose, and naming the person or persons to whom such payment is to be
made.
2.9 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED.
In any and every case where payment for purchase of securities for the account
of the Fund is made by the Custodian in advance of receipt of the securities
purchased in the absence of specific written instructions from the Fund to so
pay in advance, the Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been received by the
Custodian, except that in the case of repurchase agreements entered into by the
Fund with a bank which is a member of the Federal Reserve System, the Custodian
may transfer funds to the account of such bank prior to the receipt of written
evidence that the securities subject to such repurchase agreement have been
transferred by book-entry into a segregated non-proprietary account of the
Custodian maintained with the Federal Reserve Bank or of the safe-keeping
receipt, provided, that such securities have in fact been so transferred by
book-entry.
2.10 PAYMENTS FOR REPURCHASES OR REDEMPTIONS OF SHARES OF THE FUND. From
such funds as may be available for the purpose but subject to the limitations of
the Articles of Incorporation and any applicable votes of the Board of Directors
of the Fund pursuant thereto, the Custodian shall, upon receipt of instructions
from the Transfer Agent, make funds available for payment to holders of Shares
who have delivered to the Transfer Agent a request for redemption or repurchase
of their Shares. In connection with the redemption or repurchase of Shares of
the Fund, the Custodian is authorized upon receipt of instructions from the
Transfer Agent to wire funds to or through a commercial bank designated by the
redeeming shareholders. In connection with the redemption or repurchase of
Shares of the Fund, the Custodian shall honor checks drawn on the Custodian by a
holder of Shares, which checks have been furnished by the Fund to the holder of
Shares, when presented to the Custodian in accordance with such procedures and
controls as are mutually agreed upon from time to time between the Fund and the
Custodian.
2.11 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust company
which it itself qualified under the Investment Company Act of 1940, as amended,
to act as a custodian, as its agent to carry out such of the provisions of the
Article 2 as the Custodian may from time to time direct; PROVIDED, however, that
the appointment of any agent shall not relieve the Custodian of its
responsibilities or liabilities hereunder.
2.12 DEPOSIT OF FUND ASSETS IN SECURITIES SYSTEMS. The Custodian may
deposit and/or maintain securities owned by the Fund in a clearing agency
registered with the Securities and Exchange Commission under Section 17A of the
Securities Exchange Act or 1934, which acts as a securities depository, or in
the book-entry system authorized by the U.S. Department of the Treasury and
certain federal agencies, collectively referred to herein as "Securities System"
in accordance with applicable Federal Reserve Board and Securities and Exchange
Commission rules and regulations, if any, and subject to the following
provisions:
(1) The Custodian may keep securities of the fund in a Securities
System PROVIDED that such securities are represented in an account
("Account") of the Custodian in the Securities System which shall not
include any assets of the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
(2) The records of the Custodian with respect to securities of the
Fund which are maintained in a Securities System shall identify by book-
entry those securities belonging to the Fund;
(3) The Custodian shall pay for securities purchased for the account
of the Fund upon (i) receipt of advice from the Securities System that such
securities have been transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such payment and transfer
for the account of the Fund. The Custodian shall transfer securities sold
for the account of the Fund upon (i) receipt of advice from the Securities
System that payment for such securities has been transferred to the
Account, and (ii) the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of the Fund. Copies of
all advises from the Securities System of transfers of securities for the
account of the Fund shall identify the Fund, be maintained for the Fund by
the Custodian and be provided to the Fund at its request. Upon request,
the Custodian shall furnish the Fund confirmation of each transfer to or
from the account of the Fund in the form of a written advice or notice and
shall furnish to the Fund copies of daily transaction sheets reflecting
each day's transactions in the Securities System for the account of the
Fund.
(4) The Custodian shall provide the Fund with any report obtained by
the Custodian on the Securities System's accounting system, internal
accounting control and procedures for safeguarding securities deposited in
the Securities System;
(5) The Custodian shall have received the initial or annual
certificate, as the case may be, required by Article 9 hereof;
(6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for any loss or damage to the Fund
resulting from use of the Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its agents or of any
of its or their employees or from failure of the Custodian or any such
agent to enforce effectively such rights as it may have against the
Securities System; at the election of the Fund, it shall be entitled to be
subrogated to the rights of the Custodian with respect to any claim against
the Securities System or any other person which the Custodian may have as a
consequence of any such loss or damage if and to the extent that the Fund
has not been made whole for any such loss or damage.
2.13 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts for and on
behalf of the Fund, into which account or accounts may be transferred cash
and/or securities, including securities maintained in an account by the
Custodian pursuant to Section 2.12 hereof, (i) in accordance with the provisions
of any agreement among the Fund, the Custodian and a broker-dealer registered
under the Exchange Act and a member of the NASD (or any futures commission
merchant registered under The Commodity Exchange Act), relating to compliance
with the rules of the Options Clearing Corporation and of any registered
national securities exchange (or the Commodity Futures Trading Commission or any
registered contract market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with transactions by the
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 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, BUT ONLY, in the case of clause (iv), upon receipt of, in addition to
Proper Instructions, a certified copy of a resolution of the Board of Directors
or of the Executive Committee signed by an officer of the Fund and certified by
the Secretary or an Assistant Secretary, setting forth the purpose or purposes
of such segregated account and declaring such purposes to be proper corporate
purposes.
2.14 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute
ownership and the certificates and affidavits for all federal and state tax
purposes in connection with receipt of income or other payments with respect to
securities of the Fund held by it and in connection with transfers of
securities.
2.15 PROXIES. The Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed by the registered holders of such
securities, if the securities are registered otherwise than in the name of the
Fund or a nominee of the Fund, all proxies, without indication of the manner in
which such proxies are to be voted, and shall promptly deliver to the Fund such
proxies, all proxy soliciting materials and all notices relating to such
securities.
2.16 COMMUNICATIONS RELATING TO FUND PORTFOLIO SECURITIES. The Custodian
shall 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 purchased or sold by
the Fund) received by the Custodian from issuers of the securities being held
for the Fund. With respect to tender or exchange offers, the Custodian shall
transmit promptly to the Fund all written information received by the Custodian
from issuers of the securities whose tender or exchange is sought and form the
party (or his agents) making the tender or exchange offer. If the Fund desires
to take action with respect to any tender
offer, exchange offer or any other similar transaction, the Fund shall notify
the Custodian at least three (3) business days prior to the date on which the
Custodian is to take such action.
2.17 PROPER INSTRUCTIONS. Proper Instructions as used throughout this
Article 2 means a writing signed or initialed by one or more person or persons
as the Board of Directors shall have from time to time authorized. Each such
writing shall set forth the specific transaction or type of transaction
involved, including a specific statement of the purpose for which such action is
requested. Oral instructions will be considered Proper Instructions if the
Custodian reasonably believes them to have been given by a person authorized to
give such instructions with respect to the transaction involved. The Fund shall
cause all oral instructions to be confirmed in writing. Upon receipt of a
certificate of the Secretary or an Assistant Secretary as to the authorization
by the Board of Directors of the Fund accompanied by a detailed description of
procedures approved by the Board of Directors, Proper Instructions may include
communications effected directly between electromechanical or electronic devices
provided that the Board of Directors and the Custodian are satisfied that such
procedures afford adequate safeguards for the Fund's assets.
2.18 ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY. The Custodian may in its
discretion, without express authority from the Fund:
(1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
Contract, PROVIDED, that all such payments shall be accounted for to the
Fund;
(2) surrender securities in temporary form for securities in
definitive form;
(3) endorse for collection, in the name of the Fund, checks, drafts
and other negotiable instruments; and
(4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and other
dealings with the securities and property of the Fund except as otherwise
directed by the Board of Directors of the Fund.
2.19 EVIDENCE OF AUTHORITY. The Custodian shall be protected in acting
upon any instructions, notice, request, consent, certificate or other instrument
or paper believed by it to be genuine and to have been properly executed by or
on behalf of the Fund. The Custodian may receive and accept a certified copy of
a vote of the Board of Directors of the Fund as conclusive evidence (a) of the
authority of any person to act in accordance with such vote, or (b) of any
determination or of any action by the Board of Directors pursuant to the
Articles of Incorporation as described in such vote, and such vote may be
considered as in full force and effect until receipt by the Custodian of written
notice to the contrary.
3. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND
CALCULATION OF NET ASSET VALUE AND NET INCOME.
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board of Directors of the Fund to keep the
books of account of the Fund and/or compute the net asset value per share of the
outstanding shares of the Fund or, if directed in writing to do so by the Fund,
shall itself keep such books of account and/or compute such net asset value per
share. If so directed, the Custodian shall also calculate daily the net income
of the Fund as described in the Fund's currently effective prospectus and shall
advise the Fund and Transfer Agent daily of the total amounts of such net income
and, if instructed in writing by an officer of the Fund to do so, shall advise
the Transfer Agent periodically of the division of such net income among its
various components. The calculations of the net asset value per share and the
daily income of the Fund shall be made at the time or times described from time
to time in the Fund's currently effective prospectus.
4. RECORDS.
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder,
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 and shall at all times during the regular business
hours of the Custodian be open for inspection by duly authorized officers,
employees or agents of the Fund and employees and agents of the Securities and
Exchange Commission. The Custodian shall, at the Fund's request, supply the
Fund with a tabulation of securities owned by the Fund and held by the Custodian
and shall, when requested to do so by the Fund and for such compensation as
shall be agreed upon between the Fund and the Custodian, include certificate
numbers in such tabulations.
5. OPINION OF FUND'S INDEPENDENT ACCOUNTANT.
The Custodian shall take all reasonable action, as the Fund may from time
to time request, to obtain from year to year favorable opinions from the Fund's
independent accountants with respect to its activities hereunder in connection
with the preparation of the Fund's Form N-1A, Form N-SAR or other annual reports
to the Securities and Exchange Commission and with respect to any other
requirements of such Commission.
6. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS.
The Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts, including
securities deposited and/or maintained in a Securities System, relating to the
services provided by the Custodian under this Contract; such reports, which
shall be of sufficient scope and in sufficient detail, as may reasonably be
required by the Fund, to provide reasonable assurance that any material
inadequacies would be disclosed by such examination, and, if there are no such
inadequacies, shall so state.
7. COMPENSATION OF CUSTODIAN.
The Custodian shall be entitled to reasonable compensation for its services
and expenses as Custodian, as agreed upon from time to time between the Fund and
the Custodian.
8. RESPONSIBILITY OF CUSTODIAN.
So long as and to the extent that it is in the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties. The Custodian shall
be held to the exercise of reasonable care in carrying out the provisions of
this Contract, but shall be kept indemnified by and shall be without liability
to the Fund for any action taken or omitted by it in good faith without
negligence. It shall be entitled to rely on and may act upon advice of counsel
(who may be counsel for the Fund) on all matters, and shall be without liability
for any action reasonably taken or omitted pursuant to such advice.
Notwithstanding the foregoing, the responsibility of the Custodian with respect
to redemptions effected by check shall be in accordance with a separate
agreement entered into between the Custodian and the Fund.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned to
the Fund being liable for the payment of money or incurring liability of some
other form, the Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
If the Fund requires the Custodian to advance cash or securities for any
purpose or in the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses,assessments, claims or liabilities in
connection with the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Fund shall be
security therefor and should the Fund fail to repay the Custodian promptly, the
Custodian shall be entitled to utilize available cash and to dispose of the Fund
assets to the extent necessary to obtain reimbursement.
9. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT.
This Contract shall become effective as of it s execution, shall continue
in full force and effect until terminated as hereinafter provided, may be
amended at any time by mutual agreement of the parties thereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; PROVIDED,
HOWEVER, that the Custodian shall not act under Section 2.12 hereof in the
absence of receipt of an initial certificate of the Secretary or an Assistant
Secretary that the Board of Directors of the Fund have approved the initial use
of a particular Securities System and the receipt of an annual certificate of
the Secretary or an Assistant Secretary that the Board of Directors have
reviewed the use by the Fund of such Securities System, to the extent required
in each case by Rule 17f-4 under the Investment Company Act of 1940, as amended;
PROVIDED FURTHER, HOWEVER, that the Fund shall not amend or terminate this
Contract in contravention of any applicable federal or state regulations, or any
provision of the Articles of Incorporation, and FURTHER PROVIDED, that the Fund
may at any time by action of its Board of Directors (i) substitute another bank
or trust company for the Custodian by giving notice as described above to the
Custodian, or (ii) immediately terminate this Contract in the event of the
appointment of a conservator or receiver for the Custodian by
the Comptroller of the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian such
compensation as may be due as of the date of such termination and shall likewise
reimburse the Custodian for its cots, expenses and disbursements.
10. SUCCESSOR CUSTODIAN.
If a successor custodian shall be appointed by the Board of Directors of
the Fund, the Custodian shall, upon termination, deliver to such successor
custodian at the office of the Custodian, duly endorsed and in the form for
transfer, all securities then held by it hereunder and shall transfer to an
account of the successor custodian all of the Fund's securities held in a
Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Board of
Directors of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Directors shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940, of
its own selection, having an aggregate capital, surplus and undivided profits,
as shown by its last published report, of not less than $25,000,000 all
securities, funds and other properties held by the Custodian and all instruments
held by the Custodian relative thereto and all other property held by it under
this Contract and to transfer to an account of such successor custodian all of
the Fund's securities held in any Securities System. Thereafter, such bank or
trust company shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of vote referred to or of the
Board of Directors to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to duties and obligations of the
Custodian shall remain in full force and effect.
11. INTERPRETIVE AND ADDITIONAL PROVISIONS.
In connection with the operation of this Contract, the Custodian and the
Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in writing signed by both parties and shall be
annexed hereto, PROVIDED that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the Articles of Incorporation of the Fund. No interpretive or additional
provisions made as provided in the preceding sentence shall be deemed to be an
amendment of this Contract.
12. TEXAS LAW TO APPLY.
This Contract shall be construed and the provisions thereof interpreted
under an in accordance with laws of The State of Texas.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative on July 1,
1993.
SM&R CAPITAL FUNDS, INC.
By: XXXXXX X. XXXXXX
President
SECURITIES MANAGEMENT AND RESEARCH, INC.
By: XXXXXX X. XXXXXXXX
Vice President
