HomeMy WebLinkAboutR2009-029iT
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DENTON AUTHORIZING
THE INVESTMENT OF PUBLIC FUNDS IN TEXAS SHORT TERM ASSET RESERVE
PROGRAM ("TEXSTAR"), A TEXAS LOCAL GOVERNMENT INVESTMENT POOL;
DELEGATING AUTHORITY TO INVEST FUNDS AND ACT AS CUSTODIAN OF
INVESTMENTS PURCHASED WITH LOCAL INVESTMENT FUNDS TO TEXSTAR;
PROVIDING FOR THE INVESTMENT OF PUBLIC FUNDS CONSISTENT WITH THE
PUBLIC FUNDS INVESTMENT ACT AND THE CITY'S INVESTMENT POLICY;
DESIGNATING AUTHORIZED REPRESENTATIVES; AUTHORIZING THE MAYOR TO
EXECUTE THE APPLICATION FOR PARTICIPATION; AND PROVIDING FOR AN
EFFECTIVE DATE.
WHEREAS, the governing body of the City of Denton ("Applicant") has duly authorized
this application by adopting the following resolution at a meeting of such governing body duly
called, noticed, and held in accordance with the Texas Open Meeting Law, chapter 551, Texas
Government Code: and
WHEREAS; it is in the best interest of the Applicant to invest its funds jointly with other
Texas local governments in TexSTAR in order to better preserve and safeguard the principal and
liquidity of such funds and to earn an acceptable yield; and
WHEREAS, the Applicant is authorized to invest its public funds and fiends under its
control in TexSTAR and to enter into the application for participation authorized herein; NOW,
THEREFORE,
THE COUNCIL'OF THE CITY OF DENTON HEREBY RESOLVES:
SECTION 1. The form of application for participation in TexSTAR attached to this
resolution is approved. The officers of Applicant specified in the application are authorized to
execute and submit the application, to open accounts, to deposit and withdraw funds, to
designate other authorized representatives, and to take all other action required or permitted by
Applicant under the Agreement created by the application, all in the name and on behalf of
Applicant.
SECTION 2. This resolution will continue in full force and effect until amended or
revoked by Applicant and written notice of the amendment or revocation is delivered to the
TexSTAR Board.
SECTION 3. Terms used in this resolution have the meanings given to them by the
application.
SECTION 4. Applicant agrees with other TexSTAR Participants and the TexSTAR
Board to the Terms and Conditions of Participation in TexSTAR, effective on this date, which
are incorporated herein by reference. Applicant makes the representations, designations,
i•r
delegations, and representations, designations, delegations, and representations described in the
Terms and Conditions of Participation.
Each of the following Applicant's officials is designated as Applicant's Authorized
Representative authorized to give notices and instructions to the Board in accordance with the
Agreement, the Bylaws, the Investment Policy, and the Operating Procedures:
1. Name: Randee Klingele Title: Treasury Services Specialist
Phone/Fax/Email: (940) 349-8206 / (940) 349-7206 / randee.klingele(@cityofdenton.com
Signature:"
2. Name: Antonio Puente, Jr.Title: Treasury & Revenue Anal
Phone/Fax/Email: 949 349-728 9 0 349-7206 / antonio. uente c ,cit ofdenton.com
Signature:
L.
3. Name: Caroline Finley itle:Treasury & Debt Manager
Phone/Fax/Email: 940 349-7743-1,(940) 349-7206 / caroline.finle c cit ofdenton.com
Signature:
4. Name: Bryan Langley Title: Director of Finance
Phone/Fax/Email: (940),349-8224 / (940)(3-4-'9-7206 / brvan.lanizley(@cityofdenton.com
Signature:
5. Name: Jon Fortune Title: Assistant City Manager
Phone/Fax/Email: 40 349-8535 / 940 349-7206 / ion. fortune cit ofdenton.com
Signature: Uht~
1 V
The following Applica s offc' listed above is designated as the Primary Contact and will
receive all TexSTAR correspondence including transaction confirmations and monthly
statements:
Name: Randee Klingele Email: randee.klineele cbcitvofdenton.com
The following Applicant official not listed above is designated as an Applicant Inquiry Only
Representative authorized to obtain account information:
Page 2
6. Name: N/A Title: N/A
Phone/Fax/Email:
Applicant may designate other authorized representatives by written instrument signed by an
existing Applicant Authorized Representative or Applicant's chief executive officer.
SECTION 5. This resolution shall become effective immediately upon its passage and
approval.
p~j~
PASSED AND APPROVED this the day of i6~/'(/ 2009.
i4A. Bb OUVAYOR
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
BY:
AAUTO LEGAL FORM:
ANITA BURGESS, CITY ATTORNEY
BY:
Page 3
TexSTAR
APPLICATION FOR PARTICIPATION IN TExSTAR
The undersigned local government (Applicant) applies and agrees to become a Participant in the Texas Short Term
Asset Reserve Program (TExSTAR).
1.Authorization. The governing body of Applicant has duly authorized this application by adopting the
following resolution at a meeting of such governing body duly called, noticed, and held in accordance with the
Texas Open Meeting Law, chapter 551, Texas Government Code, on November 3, 2009:
WHEREAS, it is in the best interests of this governmental unit ("Applicant') to invest its funds jointly with other
Texas local governments in the Texas Short Term Asset Reserve Program (TExSTAR) in order better to
preserve and safeguard the principal and liquidity of such funds and to earn an acceptable yield; and
WHEREAS, Applicant is authorized to invest its public funds and funds under its control in TExSTAR and to
enter into the participation agreement authorized herein;
Now, THEREFORE, BE IT RESOLVED THAT:
SECTION 1. The form of application for participation in TExSTAR attached to this resolution is approved. The
officers of Applicant specified in the application are authorized to execute and submit the application, to open
accounts, to deposit and withdraw funds, to designate other authorized representatives, and to take all other
action required or permitted by Applicant under the Agreement created by the application, all in the name and
on behalf of Applicant.
SECTION 2. This resolution will continue in full force and effect until amended or revoked by Applicant and
written notice of the amendment or revocation is delivered to the TExSTAR Board.
SECTION 3. Terms used in this resolution have the meanings given to them by the application."
2.Agreement. Applicant agrees with other TExSTAR Participants and the TExSTAR Board to the Terms and
Conditions of Participation in TExSTAR, effective on this date, which are incorporated herein by reference.
Applicant makes the representations, designations, delegations, and representations described in the Terms
and Conditions of Participation.
3.Authorized Representatives. Each of the following Participant officials is designated as Participants
Authorized Representative authorized to give notices and -instructions to the Board in accordance with the
Agreement, the Bylaws, the Investment Policy, and the Operating Procedures:
Name Signature Title Direct Phone
Treasury Service Specialist 940-349-8206RandeeKlingeleJ
Antonio Puente, Jr.Revenue & Treasury Analyst 940-349-7283
i
Caroline Finley I IX Treasury & Debt Manager 940-349-7743
x
Bryan Langley Director of Finance 940-349-8224
Jon Fortune Assistant City Manager 940-349-8535
The following Participant official listed above is designated as the Primary Contact and will receive all
TexSTAR correspondence including transaction confirmations and monthly statements [required]:
Name E-mail address
Randee Klingele randee.klingele(a)cityofdenton.com
The following Participant official not listed above is designated as a Participant Inquiry Only Representative
authorized to obtain account information [optional]:
Name Signature Title
N/A N/A N/A
Applicant may designate other authorized representatives by written instrument signed by an existing
Applicant Authorized Representative or Applicant's chief executive officer.
4.Taxpayer Identification Number. Applicant's taxpayer identification number is 75-6000514
5.Bank Information Sheet(s). The attached 1 Bank Information Sheet(s) is or are approved and incorporated
herein by reference to establish account(s) in the name of Applicant.
Dated this 3rd day of November, 2009
City of Denton, Texas
A'pplicant)
By:Q1
Si "natu a of offici
Mark A. Burroughs, Mayor
Printed name and title)
Approved and accepted:
TEXAS SHORT TERM ASSET RESERVE FUND
By: FIRST SOUTHWEST ASSET MANAGEMENT, INC.,
Participant Services Administrator
By:Date:.............................
Authorized Signer
exSTAq BANK. INFORMATION SHEET
EFFECTIVE DATE: 11/03/2009
Please check all that apply.City of Denton
Participant Name
Add new account Wire and ACH'
215 E. McKinney St.
Street Address
Change Information 12VVre Only
Attn: Finance Department, 215 E. McKinney St.
Mailing Address
ACH Only'
Denton TX 76201 Denton
City State Zip County
Randee Klingele
Location Series Fund Primary Representative
Operating Account 940) 349-8206 940) 349-7206
Account Name Phone Fax
INSTRUCTIONS
Bank Name:Wachovia/Wells Fargo Bank, N.A.
Bank Address:1000 Louisiana St.
City:Houston State:TX Zip:77002
Bank ABA No. (9 digits):111025013 Bank Account No:2000029861480
Bank Account Name:Control Concentration Bank Contact:Kay Thomas Brown
Correspondent Bank (if any) Name/City:N/A
Bank ABA No:N/A Account Name:N/A Account No:N/A
CONFIRM THE INSTRUCTIONS FOR WIRE AND ACH TRANSFERS WITH YOUR LOCAL BANK. ACH INSTRUCTIONS MAY VARY FROM YOUR
BANK'S WIRING INSTRUCTIONS IF THE LOCAL BANK IS NOT ON-LINE WITH THE FEDERAL RESERVE. IF ACH INSTRUCTIONS DIFFER FROM
WIRING INSTRUCTIONS, PLEASE COMPLETE AN ADDITIONAL BANK INFORMATION SHEET.
If ACH availability is selected, I hereby authorize JP Morgan Chase to directly deposit and withdraw funds by means of ACH electronic transfer to and
from the financial institution and the account designated above ("Designated Account'). I agree that this authorization may be withdrawn with at least
45-days advance written notice to TexSTAR Participant Services. I understand that TexSTAR reserves the right to discontinue ACH electronic transfer
without advance notice. I also authorize JP Morgan Chase to deduct from the Designated Account or from subsequent deposits made to the Designated
Account all amounts deposited in error. Likewise, I authorize JP Morgan Chase to credit all amounts withdrawn in error to Designated Account.
NOTE: This authorization must be executed by two current Authorized Representatives of the Participant as set forth in the duly
enacted Resolution of the Participant which is on file with TexSTAR.
As a 71~ A horized Rep ese ative, t certify that the above information is both true and correct.
Bryan Langley Director of Finance
Au ri ed Represe t e Signature Printed Name Title Datet~v
Jon Fortune Assistant City Manager
Authori e I Repre rtative Signature Printed Name Title Date
TexSTAR
INFORMATION
STATEMENT
CASH RESERVE FUND)
The Premier Investment Service for Texas
Local Governments
1 1 1
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TExSTAR 4
Administration of TExSTAR 5
Participation in TExSTAR 8
Summary of Operating Procedures 8
No person.or entity has.been authorized to provide.or.communicate any information or to
make. any-representations-other than those contained in this Information Statement, and,
if given or made, such other information or representations must not be relied upon as
having been authorized by TEXSTAR, its Board of Directors, the program administrators
or any agent of the- foregoing. -The attachments -are- part of this Information Statement.
The information contained in this document.is subject to change. without prior notice.
If you have any questions regarding this material, please contact:
TExSTAR Participant Services
First Southwest Asset Management, Inc.
325 North St. Paul, Suite 800
Dallas, Texas 75201
www.texstar.org
1-800-TExSTAR (1-800-839-7827) • (214) 953-8890 • Fax (214) 953-8878
E:mail: texstar(c-Virstsw.com
TexSTAF2_ il,
Texas Short Term Asset Reserve Program ("TexSTAR") has been organized in conformity
with the Interlocal Cooperation Act, Chapter 791 of the Texas Government Code, and the
Public Funds Investment Act, Chapter 2256 of the Texas Government Code. These two
acts provide for the creation of public funds investment pools (including TExSTAR) and
authorize eligible governmental entities ("Participants") to invest their public funds and funds
under their control through the investment pools.
J. P. Morgan Investment Management, Inc. ("JPMIM") and First Southwest Asset
Management, Inc. ("FSAM") serve as co-administrators for TEXSTAR under an agreement
with the TexSTAR board of directors (the "Board"). JPMIM provides investment services,
and FSAM provides participant services and marketing. Custodial, transfer agency, fund
accounting and depository services are provided by JPMorgan Chase Bank and/or its
subsidiary J.P. Morgan Investor Services Co.
The Board may establish separate Funds within TEXSTAR from time to time. Participants
choose the Funds in which their deposits are invested. Participants' assets in the Funds are
represented by units of beneficial interest ("units"). The Board may issue an unlimited
number of units in each Fund.
This Information Statement provides information relating to investments in the TexSTAR
Cash Reserve Fund ("the Fund").
Public Funds Investment Act Disclosure Items-,
Section 2256.016 of the Public Funds Investment Act requires investment pools to provide
an information statement to the investment officer or other authorized representative of an
investing entity. This section provides the required information for TExSTAR.
1.Objectives of TexSTAR. The primary objectives of TexSTAR are, in order of
priority, preservation and protection of principal, maintenance of sufficient liquidity to
meet Participants' needs, diversification to avoid unreasonable or avoidable risks,
and yield. There is no sales charge and no investment minimum. TEXSTAR will
invest only in instruments authorized under both the Public Funds Investment Act
and the current TEXSTAR Investment Policy. Note Item 2 of this section for a
description of authorized TEXSTAR investments.
After consideration of safety and liquidity, the TexSTAR Fund will be directed toward
achieving a competitive rate of return for Participants. Every effort will be made to
minimize market and credit risk through investment diversification. So that TexSTAR
is considered a 2a7-like pool" under Governmental Accounting Standards
Statement No. 31, TexSTAR will operate in a manner consistent with Rule 2a-7
under the Investment Company Act of 1940, as amended.
2.Types of Investments Authorized for TexSTAR Cash Reserve Fund. The
investment policies and composition guidelines for the TEXSTAR Cash Reserve
Fund are summarized below. The TexSTAR Investment Policy restricts investment
of the Cash Reserve Fund portfolio as follows:
I
TexSTAR,
Authorized Investments:
A. Obligations of or guaranteed or insured by the United States Government or
its agencies and instrumentalities with a maximum final stated maturity limited
to 397 days for fixed rate securities and 24 months for variable rate notes;
B.Fully collateralized repurchase agreements and reverse repurchase
agreements with a defined termination date not to exceed 95 calendar days
unless the repurchase agreement has a put option that allows the fund to
liquidate the position at par (principal plus accrued interest) with no more
than 7 days notice to the counterparty and secured by any obligation of the
United States or its agencies or its instrumentalities. The repurchase and
reverse repurchase agreements must be placed with primary government
securities dealers and/or state or national banks doing business in the State
of Texas.
Prohibited Investments:
The TExSTAR Cash Reserve Fund will not invest in:
A.Derivatives, which include instruments which have embedded features that
alter their character or income stream or allow holders to hedge or speculate
on a market or spreads between markets that are external to the issuer or are
not correlated on a one-on-one basis to the associated index or market.
0tl B.Commercial paper.
C. Certificates of deposit.
D.Money market mutual funds
Diversification Guidelines:
Specific Fund diversification limitations govern investments of the TExSTAR Cash
Reserve Fund portfolio, applied as the time of purchase.
A.100% of the Fund may be invested in obligations of the United States or its
agencies or instrumentalities.
B.100% of the Fund may be invested in direct repurchase agreements. Not
more than 25% of the Fund may be invested in term repurchase agreements.
C.Reverse repurchase agreements will be used primarily to enhance Fund
return and may not total more than one-third (1/3) of the total Fund assets.
D. A maximum of 60 percent (60%) of the Fund may be invested in approved
variable rate notes.
3.Maximum Average Dollar-Weighted Maturity. The dollar weighted average
maturity of the TExSTAR Cash Reserve Fund portfolio may not exceed sixty (60)
2
TexSTAR
low
days calculated in accordance with SEC Rule 2a-7 or ninety (90) days based on the
stated maturity of Fund investments.
4.Maximum Stated Maturity Date. The maximum stated maturity for any obligation of
the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve
Fund portfolio is limited to 397 days for fixed rate securities and 24 months for
variable rate notes.
5.Size of the Pool. The current size of the TexSTAR Cash Reserve Fund is provided
in the TEXSTAR monthly newsletter or is available by contacting TEXSTAR
Participant Services at 1-800-TEXSTAR (1-800-839-7827). A copy of the most
recent newsletter may be obtained in connection with and in addition to this
Information Statement.
6.TEXSTAR Advisory Board. Section 2256.016(8)(1) of the Public Funds Investment
Act requires TEXSTAR to establish and maintain an advisory board composed of
Participants in TEXSTAR and other persons who do not have a business relationship
with TEXSTAR. Members are appointed and serve at the will of the Board. The
names of the Advisory Board members are listed in the TEXSTAR newsletter.
7.Custodian for TEXSTAR. JPMorgan Chase Bank serves as custodian to TEXSTAR.
The custodian will receive and disburse all Participant deposits and withdrawals,
settle .all Fund trades, safekeep securities, and collect all income or any other
payments due in connection with purchased securities for TEXSTAR.
8.Net Asset Value. The TEXSTAR Cash Reserve Fund seeks to maintain a net asset
value of $1.00 per unit and is designed to be used by Participants for investment of
funds that require daily liquidity availability.
9.Source of Payment. The only source of payment to Participants is the market value
of the assets of the TEXSTAR Fund in which they invest and the income and profits
derived from those assets. There is no secondary source of payment such as
insurance or guarantees.
10. Independent Auditor. TEXSTAR is subject to annual review by an independent
auditor consistent with the Public Funds Investment Act. PricewaterhouseCoopers
LLP has been retained to provide independent auditing services for TEXSTAR. Its
address is 1100 Louisiana, Houston, Texas 77002.
11. Operating Procedures. Deposits and withdrawals may be made by wire transfer or
automated clearinghouse ACH) transfer according to established operating
procedures. The requirements for TEXSTAR deposits and withdrawals, deadlines,
and other operating procedures are summarized under the section entitled
Summary of Operating Procedures" later in this Information Statement.
12. Performance History. The performance history, including yield, weighted average
maturity, expense ratios and average balance for the TEXSTAR Cash Reserve Fund
are available as a supplement to this Information Statement.
13. Administrator/Investment Manager. J. P. Morgan Investment Management, Inc.
JPMIM) serves as investment manager, and First Southwest Asset Management,
3
TexSTAR_ IJ
Inc. (FSAM) serves as customer services and marketing agent, for TEXSTAR.
JPMIM is an asset management subsidiary of JPMorgan Chase & Co., a leading
global financial services company and is one of the largest asset managers
worldwide. FSAM is the investment services affiliate of First Southwest Company.
Founded in 1946, Texas based-First Southwest Company is consistently ranked as
one of the nation's leading providers of financial advisory and underwriting services
and maintains a dominating presence in the Southwest and Texas.. FSAM and
JPMIM have extensive experience with the administration and investment
management of local government investment pools. They provide administrative and
investment services to the Board under a contract that may be extended periodically
to a term of two years or less. They may be replaced by the Board either for cause
or by affiliates or upon resignation, or by an affiliate of the co-administrator, or with
the approval of Participants owning two-thirds of the units in TEXSTAR. JPMorgan
Chase Bank, the TExSTAR custodian, is the principal banking affiliate of JPMorgan
Chase & Co.
Understanding the Risks with Investing in T~x "TA
Before making an investment decision, each Participant should consider a minimum of two
types of risks in determining whether any investment, including TEXSTAR, is appropriate:
Credit Risk. Credit risk is the possibility that the issuer of a security will fail to make
timely payments of interest or principal. In general, the lower the credit quality of a
security, the higher the yield and the higher the element of credit risk, all other
factors.being equal. In an attempt to minimize credit risk, the TEXSTAR investment
policy allows investment-of the TEXSTAR Cash Reserve Fund-only in the obligations
described above.
The-credit risk associated with investments in direct obligations of the United States
is considered minimal by most authoritative sources. Obligations issued or
guaranteed by many Federal agencies or government-sponsored enterprises are not
direct obligations of the United States and offer.more varied credit risk. Noting that
the United States government is not obligated to provide support or guarantees to its
instrumentalities, TExSTAR's investment manager will invest in obligations issued by
an agency or instrumentality only after conducting appropriate credit risk analysis
and believing that any credit risk with respect to the issuer is minimal.
TExSTAR's investment manager will also invest in repurchase agreements and
reverse repurchase agreements documented by a Master Repurchase Agreement in
form approved by The Securities Industry and Financial Market Association
SIFMA")and collateralized by obligations of the United States and its agencies and
instrumentalities or other obligations the principal of and interest on which are
unconditionally guaranteed or insured'by the United States. Repurchase agreement
and reverse repurchase agreement transactions will be placed with an approved
primary government securities dealers or state or national banks doing business in
the State of Texas, and proceeds received under reverse repurchase agreements
will be reinvested in securities with the same maturity as the term of the reverse
agreement.
4
TexSTAR_ J___1
Market Risk. Market risk is the potential for a decline in market value generally due
to, but not limited exclusively to, rising interest rates. For example, a bond or other
security issued or backed by the United States government is guaranteed only as to
the timely payment of interest and principal; its market price on any given day is not
guaranteed and will fluctuate in value as market perceptions, market conditions and
interest rates change. In general, the market value of a bond varies inversely with
interest rates. If interest rates rise, then market values fall. If interest rates fall, then
market values rise. Also, the volatility and related market values typically fluctuate
more for longer-term securities than for shorter-term securities.
Restrictions on dollar weighted average maturity and maximum stated maturity for
the Fund are used in an attempt to minimize certain market risks. TexSTAR's
investment manager will maintain the dollar weighted average maturity of the Fund at
sixty (60) days or less, and the maximum stated maturity for any obligation of the
United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund
portfolio is limited to 397 days for fixed rate securities and 24 months for variable
rate notes. TexSTAR will seek to maintain a stable $1.00 net asset value per unit,
and immediate action must be taken if the net asset value of the units of any Fund
falls below $0.995 or rises above $1.005. These limitations are designed to
minimize market risk. It must be noted that the value of the TexSTAR Cash Reserve
Fund portfolio is dependent on timely receipt of principal and interest payments from
the issuers of the respective investment securities. Any delays or failures in receipt
of payments can and will have detrimental effects on the value of the Fund's portfolio
and may cause loss of principal and interest to any Participant.
TexSTAR Board. By executing and submitting an application to open an account, a
Participant designates the Board as its agent for investing deposited funds. The
Board holds legal title to all money, investments, and assets and has the authority to
employ personnel, contract for services, and engage in other administrative activities
necessary or convenient to accomplish the objectives of TExSTAR.
The business and affairs of TEXSTAR are managed by the Board in accordance with
its bylaws (the "Bylaws"). The Bylaws set forth procedures governing the selection
of, and action taken by, the Board. Board oversight of TexSTAR is maintained
through daily, weekly, and monthly reporting requirements.
The Bylaws provide for a five-member Board consisting of three representatives of
Participants and one member designated by each of the co-administrators. Board
members serve for staggered three-year terms. Replacement Board members
other than the co-administrator representatives) are appointed by the Board and
may be replaced by directors elected by the Participants in accordance with the
Bylaws. Board members serve without compensation but are entitled to
reimbursement of reasonable out-of-pocket expenses incurred in the performance of
Board duties. The names, terms, and affiliations of Board members are listed in the
TexSTAR newsletter.
Investment Management. TExSTAR's Board has adopted (and will review and
revise at least annually) a list of brokers that are authorized to engage in investment
5
TexSTAR_ %
transactions with TEXSTAR. Before a broker may be added to the list, a qualified
representative of the broker must certify that the broker has read the TexSTAR
Investment Policy and has implemented reasonable procedures and controls to
preclude investment transactions conducted between the broker and TEXSTAR that
are not authorized by the TEXSTAR Investment Policy, other than by reason of
portfolio-wide diversification requirements or subjective standards.
The investment manager may dispose of securities without regard to the time they
have been held when such actions, for defensive or other Fund management
reasons, appear advisable. Investments may be sold by one Fund to another Fund
at prevailing market prices..
All securities purchased on behalf of TexSTAR must be delivered versus payment to
the custodian bank for TexSTAR. All book entry securities, whether purchased
outright or under repurchase agreements, shall be held in a separate custodial
account at the Federal Reserve Bank in the name of TexSTAR. All securities not
held in book entry form shall be held by the Custodian or its agent. Third party
institutions must issue original safekeeping receipts to the Custodian. The
Custodian shall keep accurate records reflecting TexSTAR's ownership of the
securities. Money market fund accounts must be in the name of TexSTAR.
Ratings. In compliance with Section 2256.016(h) of the Public Funds Investment
Act, TexSTAR will operate to maintain a AAA, AAA-m or equivalent rating for the
Cash Reserve Fund from at least one nationally recognized rating agency.
TEXSTAR is currently rated AAAm by Standard and Poor's. An explanation of the
significance of such rating may be obtained from Standard & Poor's at 1221 Avenue
of the Americas, New York, New York 10020. TEXSTAR will notify Participants of
any change to its rating.
Calculation of Yields and Net Asset Value. Each day, TEXSTAR determines the
net interest income for each Fund for that day. The net interest income is
determined by adjusting TExSTAR's accrued interest for that day by the amortization
of any premiums and/or the accretion of any discounts, daily service fee, and any
gains or losses from the sale of securities. TExSTAR's daily interest rate will be
determined by dividing the net interest income for that day by the total balance
including all cash and securities) available for investment of the applicable Fund for
that day. The resulting rate will then be used to determine the amount of interest
income to distribute to each Participant's account. Interest income accrued during
the month is credited to each Participant's account at the end of the month and is
reinvested unless the Participant provides specific instructions for its withdrawal or
transfer.
Valuation of TexSTAR Assets. All investments are stated at amortized cost, which
usually approximates the market value of the securities. The stated objective of
TEXSTAR is to maintain a stable average $1.00 per unit net asset value; however,
the $1.00 net asset value is not guaranteed or insured by TEXSTAR, its Board, the i
co-administrators, their agents, or any governmental or other entity. All TEXSTAR
securities will be marked to market on a daily basis. If the ratio of the market value
of a Fund portfolio divided by the book value of the portfolio is less than 0.995 or
greater than 1.005, TEXSTAR will liquidate investments in the portfolio as required to
maintain the ratio between 0.995 and 1.005. All gains or losses from the sale of
6
TexSTAR_ S-
securities will be distributed among Participants in the applicable Fund on a pro rata
basis over a period of up to 30 days from the date the gain or loss is realized. If a
Fund is dissolved, earnings may be withheld after notice of dissolution, as needed to
provide for Fund liabilities.
Ethics and Conflicts of Interest. The co-administrators' staff must refrain from
personal business activity that conflicts with the proper execution and management
of the investment program or that could impair their ability to make impartial
decisions. TExSTAR may purchase investments from the co-administrators or their
affiliates only on terms and conditions approved by a majority of the Participant
members of the Board. The co-administrators must implement policies and
procedures to comply with these restrictions.
Agents, advisors and contractors providing services in connection with the custody,
management and investment of public funds under a contract with TExSTAR must at
all times avoid any actual or apparent conflict of interest with respect to the custody,
management and investment of public funds, subject to the foregoing. As stated in
the TExSTAR Investment Policy, a conflict of interest refers to any situation in which
the Board determines, at its sole discretion, that the duties of the agent, advisor or
contractor under its contract with TExSTAR are or may become inconsistent with the
interests or other duties of the agent, advisor or contractor.
Fees and Expenses. In return for contracted service, TExSTAR has agreed to pay
service fees to the co-administrators and custodian totaling twelve (12) basis points
per year, calculated daily on the total fund balances. The co-administrators may (but
are not obligated to) waive all or a portion of their fees from time to time. The service
fees cover all normal services provided to the Board by the co-administrators and
custodian. Additional expenses required to attain TExSTAR objectives and conduct
on-going operations will be incurred by TExSTAR. These include expenses for
independent auditors, legal representation, liability insurance, board meeting
attendance, and ratings.
The TExSTAR service fee and other expenses are deducted from the gross interest
earnings daily and charged monthly. There is no direct reduction to the Participant's
principal account related to the payment of fees and expenses, but only the
remaining net income after deduction of the applicable fees and expenses is credited
to the Participant's account. All TExSTAR rates are quoted net of fees and
expenses. There are no hidden costs or additional reductions to Participants'
accounts. In the event a Fund does not earn adequate interest income and profits to
cover allocable expenses and fees for a given month or period, the deficit will be
carried over to future months or periods when adequate income and profits have
been received.
Liability. TExSTAR directors and officers will not be liable for (and TExSTAR
earnings may be applied to indemnify them against) loss and liability that may arise
from or in connection with any of their acts or omissions, including acts and
omissions caused by their negligence, to the extent permitted by law.
7
TexSTAR
Participation in TEXSTAR
Participation in TExSTAR is limited to eligible governmental entities that have authorized,
executed, and submitted an application to participate in TUSTAR.
Eligibility to Invest. Only eligible local governments and agencies of the State of
Texas may become Participants. Eligible local governments include any
municipality, school district, county, special district, junior college district, or other
legally constituted political subdivision of the State or a combination of political
subdivisions e.g., a combination by means of an interlocal agreement). Eligible
state agencies include: (a) a department, board, bureau, commission, court, office,
authority, council or institution of the state, (b) a university, college, or any service or
part of a state institution of higher education, and (c) a statewide job or employment
training program for disadvantaged youths that is substantially financed by federal
funds and was created by execution order not later than December 30, 1986. Each
state agency must have authority under state law to invest its funds in the Pool and
in investments authorized by the Public Funds Investment Act.
Establishment of Accounts. To participate in TExSTAR, an eligible local
government or state agency must duly authorize, complete, execute, and submit an
application for participation. By executing and submitting an application, a
Participant agrees to the terms and conditions governing TExSTAR as well as its
Bylaws, Investment Policy, and Operating Procedures. Application forms (including
forms of authorizing resolutions) may be obtained from TExSTAR Participant
Services.In their applications, Participants must designate authorized
representatives who have authority to transfer funds for investment, to withdraw
funds, to issue- letters of instructions, and to take all other actions necessary or
appropriate for the investment of funds in TExSTAR. A Participant must also provide
a separate bank information sheet for each account and sub-account, signed by two
authorized, Participant representatives unless otherwise permitted by the Operating
Procedures. The Operating Procedures describe in detail the procedures required
for the establishment of account(s), deposits to and withdrawals from TExSTAR, and
related information. A copy of the Operating Procedures may be obtained from
TExSTAR Participant Services.
Amendments. The Board may amend the TExSTAR terms and conditions, Bylaws,
Investment Policy, and Operating Procedures. It must give Participants at least
30 days advance notice of each amendment. Participants are deemed to have
accepted the amendments unless they withdraw from TExSTAR before the
amendments are effective.
Surrimary • Operating Procedures
Deposits to and withdrawals from TExSTAR may be made by wire transfer or automated
clearinghouse (ACH) transfer according to established operating procedures. Excerpts from
the current Operating Procedures are provided below.
Wire Transfers. Wire transfer transactions will be executed on the same day as
initiated. TExSTAR must be notified via automated means (i.e., by voice response
8
TexSTAR_ II-,
unit, TEXSTAR on-line direct dial modem, or TEXSTAR internet access) by 4:00 p.m.
central time (or by both voice and facsimile to a Participant Services Representative
by 3:00 p.m. central time) for all wire transfer activity, and incoming deposits must
be received by 4:00 p.m. central time, to earn interest for that day. In addition, wire
transfer deposits received after 4:00 p.m. central time for which TEXSTAR has not
received a corresponding subscription transaction by the applicable deadline will not
be invested until the following business day. Outgoing wire transfers from TEXSTAR
requested by 10:30 a.m. are typically sent between 12:00 noon and 12:30 p.m.
central time. Some delay may occur, depending on unforeseen circumstances,
including, but not limited to, delays or failures unrelated to TEXSTAR.
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone the
date of payment in the event that the Federal Reserve is closed other than for
customary weekend and holiday closings, in the event of a general suspension of
trading in any securities market which affects TEXSTAR operations, or if, in the
opinion of the Board, an emergency exists so that the disposal of TExSTAR's
securities or determination of its net asset value is not reasonably practical.
TEXSTAR will process deposits and withdrawal requests only on the days the
Federal Reserve is open for business. TEXSTAR may also be closed or have limited
trading hours on any Friday preceding or Monday following a weekend, which
includes a national holiday provided that notice has been given to Participants at
least 30 days prior to such a day, or whenever The Bond Market Association
recommends that markets for fixed income securities close.
Automated Clearing House ("ACH") Transfers. ACH transactions will be
executed on the business day following the date the transaction was initiated.
TEXSTAR must be notified by 3:30 p.m. central time by automated means (or by
both voice and facsimile to a Participant Services Representative by 3:00 p.m.
central time) for all ACH transfer activity, one day prior to the actual settlement of
the funds. ACH transfer withdrawals are sent in accordance with the prearranged
Participant information as provided on the bank information sheet corresponding to
that specific TEXSTAR account or subaccount. In the event of an ACH rejection,
TEXSTAR will contact the Participant to confirm the rejection. TEXSTAR will
credit/debit the Participant's account accordingly.
Methods of Notification. Participants may notify TExSTAR of wire transfer or ACH
activity by:
a.Voice Response Unit (VRU) touch-tone telephone system;
b.TExSTAR internet access system; or
c Verbal notification to a TEXSTAR Participant Services representative followed
by a fax confirmation.
Reports. A Participant's monthly statement will be mailed within the first five (5)
business days of the respective succeeding month. The monthly statement will
include a detailed listing of the balance in the Participant's accounts as of the date of
the statement; all account activity for the previous month, including deposits and
withdrawals; daily and monthly yield information; and any special fees and expenses
9
TexSTAR ,
charged to the Participant. Additionally, copies of the Participant's reports will be
maintained and made available for a minimum of three prior TexSTAR fiscal years in
either physical or electronic form.
A complete copy of the TexSTAR Operating Procedures may be obtained by contacting
TexSTAR Participant Services.
The TexSTAR Information Statement should be read careful before investing.
Investors should consider the investment objectives, risks, charges and expenses
associated with this or any security prior to investing. Investments in TexSTAR are
not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or
any other government agency and although TexSTAR seeks to preserve the value of
the investment at a fixed price, it is possible to lose money by investing in the fund.
For further information, contact TexSTAR Participant Services at (800) 839-7827.
April 2009
10
TexSTAR
TERMS OF
PARTICIPATION AND
BYLAWS
The Premier Investment Service for
Texas Local Governments
TERMS AND CONDITIONS OF PARTICIPATION
By making application to open an account in TExSTAR, Participants agree to the following
terms and conditions and make the following representations and delegations.
1. TexSTAR.
1.1 Creation. The initial Participants have created TExSTAR as an investment pool to
provide for the joint investment of Participants' public funds and funds under their
control. TExSTAR was created under the authority of applicable Texas law, including the
Cooperation Act and the Investment Act.
1.2 Name. The name of TExSTAR is the "Texas Short Term Asset Reserve Program," but it
may do business as TExSTAR.
1.3 Governance. The business and affairs of TExSTAR will be managed by the Board.
The Board is the governing body of TExSTAR. The Board will have full power to act in
the name of TExSTAR or its own name. The Board may exercise all powers of the
governing bodies of the Participants in respect of the investment of Participant funds
deposited to TExSTAR. The Board will supervise performance of the Participants'
Agreement. The Board may appoint officers and delegate powers of the Board to the
officers in accordance with the Investment Act and the Bylaws. Members of the Board
will be selected, and the Board may act, as provided in the Bylaws.
1.4 Advisory Board. The Board shall appoint an Advisory Board. The Advisory Board
will consist of representatives of Participants and of other persons who do not have a
business relationship with TExSTAR and are qualified to advise the Board.
1.5 Bylaws. The Board will adopt (and act in accordance with) the Bylaws.
1.6 Dissolution. The Board may dissolve TExSTAR and terminate the Agreement as
provided in the Bylaws on not less than 30 days advance written notice to the
Participants and the approval of Participants owning at least two-thirds of the units in
TExSTAR.
2. PARTICIPANTS.
2.1 Agreement and Representations. By executing and submitting an application for an
account in TExSTAR, each applicant (1) agrees with the Board and each other
Participant to the terms and conditions of (and delegates to the Board all powers
described in) the Agreement, the Bylaws, the Investment Policy, and the Operating
Procedures, and (2) represents that (a) the applicant is eligible to become a Participant
and to invest its funds through TExSTAR) in accordance with the Agreement, the
Cooperative Act, and the Investment Act, (b) the Participant's governing body has duly
authorized execution of the application and investment through TExSTAR by rule, order,
ordinance, or resolution, as appropriate, and (c) the Participant has duly executed and
delivered the application.
1
2.2 Withdrawal. A Participant. may terminate its status as a Participant and its rights and
obligations under the Agreement by providing written notice of termination to the Board
in accordance with the Operating Procedures and withdrawing its account balance in full.
Absent notice of termination, withdrawal of a Participant's account balance in full will not
terminate its rights as a Participant.
3. INVESTMENTS AND OPERATIONS.
3.1 Objectives. The Board will invest TEXSTAR assets in accordance with the following
investment objectives, stated in order of priority: (1) preservation and safety of principal,
2) liquidity, and (3) yield. The Board will seek to obtain and maintain a TEXSTAR credit
rating no lower than AAA, AAA-m, or the equivalent by at least one nationally recognized
rating agency, unless otherwise permitted by the Investment Act and the Investment
Policy.
3.2 Policies. The Board will adopt an Investment Policy and Operating Procedures. The
Board will review and revise or readopt the Investment Policy annually. Participants will
make deposits to and withdrawals from the Funds and the Board will accept, hold,
invest, and remit Participant funds in each Fund, in accordance with the Investment
Policy and the Operating Procedures.
3.2.1 Investment Policy. The Investment Policy will be written, will primarily emphasize
safety of principal and liquidity in accordance with the TEXSTAR investment
objectives, will address investment diversification, yield, and maturity and the
quality and capability of investment management, and will include a list of the types
of authorized investments in which each Fund within TEXSTAR may be invested,
the maximum allowable stated maturity of any individual investment owned through
TEXSTAR, the maximum dollar-weighted average maturity of investments allowed
for each Fund, and methods to monitor the market price of investments acquired
by TEXSTAR. The Investment Policy will authorize investment only in investments
authorized by the Investment Act for the investment of Participant funds, but need
not require liquidation of investments that cease to be authorized after purchase.
Each investment strategy will use the following priorities in the order of importance
stated: (1) understanding the suitability of the investment to the financial
requirements of TEXSTAR, (2) preservation and safety of principal, (3) liquidity, (4)
marketability of the investment, (5) diversification of the investment portfolio, and
6) yield. Each Participant accepts and adopts the Investment Policy as its
investment policy for the funds it deposits with TEXSTAR.
3.2.2 Operating Procedures. The Operating Procedures will be written and will
establish procedures for (and any conditions to) becoming a Participant, opening
accounts, depositing funds, crediting earnings, charging expenses, and
withdrawing funds.
3.3 Investment Officers. The Board will designate one or more investment officers to be
responsible for the investment of funds through TEXSTAR consistent with the Investment
Policy. Investment officers for TEXSTAR will be the investment officers of Participants
or their funds invested in TEXSTAR. TEXSTAR investment officers will exercise the
judgment and care, under prevailing circumstances, that a prudent person would
exercise in the management of the person's own affairs. As fiduciaries of TEXSTAR, the
Board will retain ultimate responsibility for investments.
2
3.4 Standard of Care. Investments will be made with the judgment and care that, under
prevailing circumstances, a person of prudence, discretion, and intelligence would
exercise in the management of the person's own affairs, not for speculation, but for
investment, considering the probable safety of capital and the probable income to be
derived.
3.5 Compliance. The Board will have performed an independent annual audit of its financial
statements and, in connection with the audit, a compliance audit of management
controls on investments and of adherence to the Investment Policy.
3.6 Ownership and Custody. Participants delegate to the Board the authority to hold legal
title (as custodian) to investments purchased with their funds deposited through
TexSTAR. The Board may engage a bank or trust company to act as its custodian for
investments and its depository for temporarily uninvested funds. Participants' funds in
TexSTAR may be commingled, but will be separately accounted for. Participants will
own an undivided beneficial interest in the investments and temporarily uninvested funds
in each Fund in which it has deposited funds, in shares determined in accordance with
the Investment Policy and the Operating Procedures.
3.7 Expenses. The Board may assess expenses of operating TexSTAR against each
Participant's share of earnings from the investment of TexSTAR assets in accordance
with the Investment Policy and the Operating Procedures.
3.8 Information Statement and Reports. The Board will prepare and periodically update
or supplement an information statement containing the information specified in Section
2256.016(b) of the Investment Act. The Board will provide a copy of each update or
supplement to each Participant. The Board will furnish to each Participant's investment
officer (1) confirmations of the Participant's investments in and withdrawals from each
Fund and (2) a monthly report containing the information specified in Section
2256.016(c) of the Investment Act.
i
i
4. DEFINITIONS. IN THESE TERMS AND CONDITIONS FOR PARTICIPATION AND THE
AGREEMENT:
4.1 "Agreement" means the agreement among the Participants (and with the Board) that is
created by the Participants' authorization, execution, and submission of an application
for an account in TexSTAR. The agreement consists of (1) the applications of all
Participants who have not withdrawn as a Participant in TexSTAR in accordance with
the Operating Procedures and (2) these Terms and Conditions of Participation.
4.2 "Board" means the board of directors of TexSTAR duly elected or appointed, qualified,
and incumbent in accordance with the Bylaws.
I
4.3 "Bylaws" means the Bylaws for TexSTAR provided to the initial Participants, as
amended from time to time in accordance with the terms of the Agreement and the
Bylaws.
4.4 "Cooperation Act" means Chapter 791, Texas Government Code, as amended from j
time to time.
3
4.5 "Fund" means a separate portfolio of investments created by the Board for Participant
funds with a different investment objective or strategy or authorized investments (or
available to different categories of Participants) than other funds in TexSTAR, as
specified in the Investment Policy or the Operating Procedures.
4.6 "Investment Act" means Chapter 2256, Texas Government Code, as amended.
4.7 "Investment Policy" means the Investment Policy for TexSTAR furnished to the initial
Participants, as amended by the Board from time to time in accordance with the
Agreement and the Bylaws.
4.8 "Operating Procedures" means the Operating Procedures for TexSTAR furnished to
the initial Participants, as amended by the Board from time to time in accordance with
the Agreement and the Bylaws.
4.9 "Participant" means a municipality, a county, a school district, a district or authority
created under article 3, section 52(b) or article 16, section 59 of the Texas Constitution,
a hospital district, a state agency (as defined under Sections 771.002 and 2256.002,
Texas Government Code), or any other corporate and political entity organized under
Texas law that has duly authorized, completed, executed, and submitted an application
for an account in TexSTAR in accordance with the Operating Procedures (incorporating
these Terms and Conditions of Participation by reference) and has not terminated its
participation in TexSTAR in accordance with the Operating Procedures. The "initial
Participants" are the Participants as of April 3, 2002.
4.10 "TexSTAR" means the Texas Short Term Asset Reserve Program, a joint investment
pool created by the Agreement.
5: MISCELLANEOUS.
5.1 Notices. Notices to a Participant may be given in accordance with the Operating
Procedures to the address and the attention of the person specified in the Participant's
account application, as amended or supplemented from time to time in writing delivered
to the Board. Notices to the Board will be given as specified in the Operating
Procedures.
5.2 Liability. The Participants and TexSTAR release the directors and officers of TexSTAR
from liability for and (from and to the extent of TexSTAR earnings in the current year)
indemnify them against all loss and liability that may arise from or in connection with any
of their acts or omissions, including acts and omissions caused by their negligence, as
provided in the Bylaws, to the extent permitted by law.
5.3 Severability. If any provision or application of the Agreement is invalid, illegal, or
unenforceable, the validity, legality, and enforceability of the other provisions and
applications of the Agreement will not be impaired or otherwise affected.
5.4 Benefits of Agreement. The Agreement is for the sole benefit of the Participants, the
Board, and its officers and is not intended to create a legal right, remedy, or claim in
favor of any other person.
4
5.5 Governing Law. The Agreement is governed by and to be construed in accordance
with the laws of the State of Texas.
5.6 Term. The Agreement will have an initial term extending from the date of execution and
submission of an account application by the second initial Participant through March 31,
2003. The Agreement will be automatically renewed for an additional one-year term
beginning each April 1, except with respect to any Participant that withdrew as a
Participant in accordance with the Operating Procedures before the renewal term.
5.7 Amendments. The Agreement, Bylaws, Investment Policy, and Operating Procedures
may be amended by the Board from time to time. The Board will provide at least 30
days advance written notice of amendments to each Participant. Participants agree to
the terms of amendments unless they withdraw as a Participant before the effective date
of the amendment.
5
BYLAWS
ARTICLE I
GENERAL ORGANIZATION
SECTION 1.1. Organization.
By authorizing, executing, and submitting applications for participation that incorporate
by reference Terms and Conditions for Participation in TExSTAR, eligible local governments
and agencies of the State of Texas have agreed jointly to invest public funds and funds under
their control as a public funds investment pool ("TExSTAR") and delegated their authority to
invest the funds to a TExSTAR board of directors (the "Board"). The applications and
incorporated terms and conditions are referred to herein as the "Agreement." Eligible local
governments and agencies that are parties to the Agreement are referred to herein as
Participants." Other terms used herein have the meanings assigned to them by the
Agreement. These bylaws provide for the composition and authority of the Board.
SECTION 1.2. Name.
The name of the investment pools created by the Agreement is the Texas Short Term
Asset Reserve Program, which may do business as "TExSTAR."
SECTION 1.3. Offices.
The chief administrative office of the Board shall be located in Dallas, Texas. The Board
may also have offices at such other places within the State of Texas as the Board may from
time to time determine or the business of the Board may require.
ARTICLE 11
DIRECTORS
SECTION 2.1. Directors.
The number of directors which shall constitute the Board shall be five. Three directors
shall be officers or employees of Participants (or, prior to July 1, 2002, prospective Participants).
One director shall be an officer or employee of the company providing Participant service and
marketing to the Board (the "Participant Services Administrator") or of an affiliate. One director
shall be an officer or employee of the company providing investment management services to
the Board (the "Investment Administrator") or an affiliate. The initial directors comprising the
Board, their affiliations, and the dates their terms expire are as follows:
6
Name Affiliation Term Ends
William Chapman Central Texas Regional Mobility Authority April, 2011
Nell Lange City of Frisco April, 2012
Melinda Garrett Houston Independent School District April, 2010
Michael G. Bartolotta First Southwest Company April, 2011
Will Williams JPMorgan Chase Bank April, 2011
SECTION 2.2. Terms.
The term of office of directors (other than the initial term of the initial directors) shall be
three years. Each director not otherwise removed or replaced shall hold office until his or her
successor shall be elected or appointed and qualified.
SECTION 2.3. Vacancies.
Any vacancy occurring in the Board may be filled by a majority of the remaining
directors, even if they constitute less than a quorum of the Board, except that (1) a vacancy in a
position filled by an officer or employee of the Participant Services Administrator or the
Investment Administrator or affiliate shall be filled by appointment of the Participant Services
Administrator or the Investment Administrator, respectively, and (2) the person appointed to fill a
vacancy in any other position may be replaced by vote of the Participants as described in this
Section. A director elected to fill a vacancy shall be elected for the unexpired term of his or her
predecessor in office. The death, declination, resignation, retirement, removal, incapacity, or
inability of the directors, or any of them, shall not operate to annul TEXSTAR or the Board or to
revoke any existing agency created pursuant to the terms of the Agreement.
The Board shall give notice to the Participants of each appointment of a director to the
Participants within 45 days after the appointment. Participants may nominate one or more
candidates to replace any director appointed by the Board by written instrument delivered to the
Board. If, within 30 days after the Board gives notice of the appointment, the Board receives
one or more nominations signed by Participants owning at least 25% of the units in TUSTAR
as of the end of the month preceding the month in which the appointment is made (the "record
date"), the Board shall promptly conduct an election for a replacement director by written ballots
mailed to the Participants. The ballots shall include the names of the director appointed by the
Board and the candidates nominated by Participants owning at least 25% of the units in
TEXSTAR as of the record date. The candidate receiving the most votes on ballots completed,
signed, and returned by Participants within 30 days after the ballots are mailed, weighted by
units owned by such Participants as of the record date, shall be elected to fill the unexpired term
of the director appointed by the Board.
SECTION 2.4. Removal.
The Board may remove any director if (a) the director was an official or employee of a
Participant when he or she became a director and the director ceases to be an elected or
appointed official or employee of a Participant, either because he or she no longer serves the
Participant or the Participant withdraws from participation in TUSTAR, (b) the director files
personal bankruptcy or is adjudicated incompetent, or (c) the director has no business
relationship with the Board. A director who was an officer or employee of the Participant
7
Services Administrator or the Investment Administrator when he or she became a director may
be removed with or without cause by the Participant Services Administrator or the Investment
Administrator, respectively.
SECTION 2.5. Advisory Board.
The Board shall appoint an advisory board (the "Advisory Board") for TEXSTAR pursuant
to the Investment Act. The Advisory Board may consist of any number of persons designated
by the Board and may include members of the Board. All members of the Advisory Board shall
be either (1) a representative of a Participant or (2) a person who has no business relationship
with the Board but who is qualified to advise the Board, and the Advisory Board shall at all times
include at least one member of each such description. The Advisory Board shall have such
duties as may be delegated to it by the Board. The Board shall fix the terms of (and may
remove) members of the Advisory Board.
ARTICLE III
MEETINGS OF THE BOARD
SECTION 3.1. Location.
Meetings of the Board, regular or special, shall be held within the State of Texas or such
other location as,,may be determined by the Board and permitted by applicable law.
SECTION 3.2. Regular Meetings.
Regular meetings of the Board may be held upon such notice, at such time, and at such
place as shall from time to time be determined by the Board, subject to applicable law.
SECTION 3.3. Special Meetings.
Special meetings of the Board may be called by the President and shall be called by the
Secretary on the written request of two directors. Notice of each special meeting of the Board
shall be given to each director at least 72 hours before the date of the meeting or as otherwise
required by applicable law, except that emergency meetings may be held as provided by
applicable law.
SECTION 3.4. Waiver of Notice.
Attendance of a director at any meeting shall constitute a waiver of notice of such
meeting, except where a director attends for the express purpose of objecting to the transaction
of any business on the ground that the meeting is not lawfully called or convened. Except as
otherwise provided by law or by the Agreement, neither the business to be transacted at, nor
the purpose of, any regular or special meeting of the Board need be specified in the notice or
waiver of notice of such meeting.
SECTION 3.5. Quorum.
With respect to any issue, a majority of the directors shall constitute a quorum and the
act of a majority of the directors present when there is a quorum shall be the act of the Board.
8
SECTION 3.6. Open Meetings.
Board meetings and Advisory Board meetings shall be held in compliance with the Open
Meetings Act, chapter 551, Texas Government Code. Notices of meetings shall be posted at
the Dallas County Courthouse, the chief administrative office of the Board, and the office of the
Secretary of State.
SECTION 3.7. Committees.
The Board may from time to time appoint one or more committees of directors, including
an executive committee, which shall have and may exercise such powers as the Board may
specify in the resolutions appointing them. A majority of all the members of any such committee
may take action and fix the time and place of its meetings, unless the Board shall otherwise
provide. The Board may change the members or authority of or discharge any such committee
at any time.
SECTION 3.8. Expenses.
The directors and members of the Advisory Board shall receive no compensation, but
shall be paid their reasonable expenses, if any, of attendance at each meeting of the Board.
Per diems and expenses paid to any director by a Participant for such director's service on the
Board shall be considered an expense of the Board and shall be paid from TExSTAR earnings
upon proper invoice.
ARTICLE IV
NOTICES
SECTION 4.1. Notices.
Any notice to directors shall be in writing and shall be delivered personally or mailed to
the directors at their respective addresses appearing on the record books of the Board. Notice
by mail shall be deemed to be given at the time when the same shall be deposited in the United
States mail, postage prepaid. Notice to directors may also be given by telegram or telecopy.
SECTION 4.2. Waivers.
Whenever any notice is required to be given under the provisions of the statutes or of
these Bylaws, a waiver of notice in writing signed by the person or persons entitled to the notice,
whether before or after the time stated in the waiver, shall be deemed equivalent to giving the
notice.
ARTICLE V
OFFICERS
SECTION 5.1. General.
The officers of the Board shall consist of a president, one or more vice presidents, a
secretary, a treasurer, one or more assistant secretaries and assistant treasurers, and an
investment officer or officers. Officers of the Board shall be elected by the Board. Two or more
offices may be held by the same person, except the offices of president and secretary-
9
SECTION 5.2. Agents.
The Board may appoint such agents as it shall deem necessary or convenient. Agents
of the Board shall hold their offices for such terms and shall have such authority, exercise such
powers, and perform such duties as shall be determined from time to time by the Board
consistent with these Bylaws.
SECTION 5.3. President.
The president shall preside at all meetings of the Board and shall have such other
powers and duties as may from time to time be prescribed by the Board.
SECTION 5.4. Vice President.
During the absence or disability of the president, the vice presidents in the order of their
seniority, unless otherwise determined by the Board, shall perform the duties and may exercise
the powers of the president. The vice presidents shall also perform such other duties and have
such other authority and powers as the Board may from time to time prescribe.
SECTION 5.5. Secretary.
The Secretary shall attend all meetings of the Board, record (or cause to be recorded) all
of the proceedings of the meetings in a minute book to be kept for that purpose, and perform
like duties for the standing committees when required. The secretary shall give, or cause to be
given, notice of all meetings of the Board and shall perform such other duties and have such
other powers as may be prescribed by the Board or, consistent with these Bylaws, the
president. The secretary shall keep in safe custody the seal of the Board, if any, and, when
authorized by the Board, shall affix the same to any instrument requiring it and, when so affixed,
attest the same by his or her signature.
SECTION 5.6. Assistant Secretaries.
During the absence or disability of the secretary, the assistant secretaries in the order of
their seniority, unless otherwise determined by the Board, shall perform the duties and may
exercise the powers of the secretary. They shall also perform such other duties and have such
other powers as the Board may from time to time prescribe.
SECTION 5.7. Treasurer and Assistant Treasurers; Investment Officer.
The treasurer and any assistant treasurers and the investment officer shall perform such
duties and have such powers as the Board may from time to time prescribe or as may otherwise
be established by applicable law.
ARTICLE VI
GENERAL PROVISIONS
SECTION 6.1. Disbursements.
Withdrawals of funds invested through TEXSTAR, distributions of earnings from
investments, and all payments for investments shall be made in accordance with the Investment
Policy and the Operating Procedures. All other checks drawn by and other authorizations for
10
fund withdrawals from TEXSTAR shall be signed-by such officer or officers or such other person
or persons as the Board may from time to time designate.
SECTION 6.2. Fiscal Year.
The fiscal year of TExSTAR and the Board shall be from April 1 to March 31.
SECTION 6.3. Seal.
The Board's seal shall be.in such form as may be prescribed by the Board. The seal
may be used by causing it or a facsimile thereof to be impressed, affixed, or in any manner
reproduced.
SECTION 6.4. Books and Records.
i
The Board shall keep correct and complete books and records of account, minutes of
the proceedings of the Board, and a record of the Participants (and their addresses and the
number and class of the units held by each) at its registered office or principal place of business
or at the office of its transfer agent or registrar.
ARTICLE VII
INVESTMENT MANAGEMENT AND ADMINISTRATION
Section 7.1 Professional Management.
The Board shall contract with one or more experienced persons for account
administration, investment management, and custodial services required by TEXSTAR.
Contracts for such services shall not exceed two years in duration.
SECTION 7.2 Engagement of Service Providers.
The Board initially shall engage JPMorgan Fleming Asset Management (USA), Inc. as
Investment Administrator to provide investment management services, First Southwest Asset
Management, Inc. as Participant Services Administrator to provide participant services and
marketing, and JPMorgan Chase Bank to provide custodial services. Any person subsequently
engaged to provide such services to the Board shall be approved by Participants owning two-
thirds of the units in TEXSTAR, unless such person is an affiliate of a person previously
engaged to provide the same service and except that the Board may engage temporary
services without Participant approval if any existing service provider resigns or becomes
insolvent or unable to perform its duties or is removed for cause in accordance with the
provisions of its contract.
ARTICLE VIII
INDEMNIFICATION AND RELEASE OF DIRECTORS AND OFFICERS
SECTION 8.1. Indemnification.
A.Indemnification. Subject to the exceptions and limitations contained in
Subsection B below:
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1) every person who is, or has been, a director or officer of the Board
hereinafter referred to as a "Covered Person"), whether or not the Covered Person has
been alleged to have been negligent in the exercise of the duties of his office, shall be
indemnified to the fullest extent permitted by law against liability and against all
expenses reasonably incurred or paid by the Covered Person in connection with any
claim, action, suit, or proceeding in which he or she becomes involved as a party or
otherwise by virtue of being or having been a director or officer and against amounts
paid or incurred by the Covered Person in the settlement thereof; and
2) the words "claim", "action", "suit", and "proceeding" shall apply to all
claims, actions, suits, or proceedings (civil, criminal, or other,- including appeals), actual
or threatened, while in office or thereafter, and the words "liability' and "expenses"' shall
include, without limitation, attorneys' fees, costs, judgments, amounts paid in settlement,
fines, penalties, and other liabilities.
B.Limitations. No indemnification shall be provided hereunder to a Covered
Person:
1) who shall have been adjudicated by a court or body before which the
proceeding was brought to be liable to the Board, TExSTAR, or the Participants by
reason of fraud, willful misfeasance, or bad faith; or
2) in the event of a settlement, unless there has been a determination that
the Covered Person did not engage in fraud, willful misfeasance, or bad faith,
a) by the court or other body approving the settlement;
b) by at least a majority of those directors who are not parties to the
matter, based upon review of readily available facts (as opposed to full trial-type
inquiry); or
c) by written opinion of independent legal counsel based upon a
review of readily available facts (as opposed to a full trial-type inquiry).
C.Miscellaneous. The rights of indemnification herein provided may be insured
against by policies maintained by the Board, shall be severable, shall not be exclusive of or
affect any other rights to which any Covered Person may now or hereafter be entitled, shall
continue as to a person who has ceased to be a director or officer, and shall inure to the benefit
of the heirs, executors, and administrators of the Covered Person. Nothing contained herein
shall affect any rights to indemnification to which TExSTAR personnel, other than directors and
officers, and other persons may be entitled by contract dr otherwise under law.
D.Expenses of Defense. Expenses in connection with the preparation and
presentation of a defense to any claim, action, suit or proceeding of the character described in
Subsection A of this Section may be paid as an expense of the applicable portfolio from time to
time prior to final disposition thereof upon receipt of an undertaking by or on behalf of the
Covered Person that such amount will be paid over by him to the applicable portfolio if it is
ultimately determined that he is not entitled to indemnification under this Section; provided,
however, that either (i) the Covered Person shall have provided appropriate security for such
undertaking, (ii) the Board is insured against losses arising out of any such advance payments,
or (iii) either a majority of the directors who are not parties to the matter, or independent legal
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counsel in a written opinion, shall have determined, based upon a review of readily available
facts (as opposed to a trial-type inquiry or full investigation), that there is reason to believe that
the Covered Person will be found entitled to indemnification under this Section.
E.Right to Defend. Subject to applicable law, the Board may, and if requested in
writing by a Covered Person shall, undertake the defense of any claim, action, or proceeding in
connection with the matters set forth in Subsections A through D for which the Covered Person
is indemnified under this Section, and thereafter the Board shall not be liable to the Covered
Person for any costs of counsel or other expenses other than reasonable costs subsequently
incurred by the Covered Person at the request of the Board in connection with the defense
thereof, unless (1) the employment of such counsel has been specifically authorized in writing
by the Board, (2) the Board has failed after request to assume the defense and to employ
counsel, or (3) the named parties to any such action (including impleaded parties) include both
a Covered Person and the Board and the Covered Person shall have been advised by counsel
that there may be one or more legal defenses available to it which are different from or
additional to those available to the Board (in which case, if the Covered Person notifies the
Board in writing that it elects to employ separate counsel at the expense of the Board, the Board
shall not have the right to assume the defense of the action on behalf of the Covered Person;
provided that if the Board has insured against losses pursuant to Subsection D and the insurer
proceeds to defend the Covered Person pursuant to the policy of insurance, then the Board
shall have no further duty to indemnify costs of defense or defend the Covered Person pursuant
to this Section.
SECTION 8.2. Limitation of Liability.
The directors and officers of the Board are governmental officials and shall enjoy the
same immunities from liability and suit as are enjoyed by officers of the Participants. Provided
they have acted in good faith under the belief that their actions are in the best interest of
TEXSTAR, the directors and officers of the Board shall not be responsible for or liable in any
event for neglect or wrongdoing by them or any officer, agent, employee, or investment advisor
of TEXSTAR, but nothing contained herein shall protect any director against any liability to which
he or she would otherwise be subject by reason of fraud, willful misfeasance, or bad faith.
The directors may take advice of counsel or other experts and shall be under no liability
for any act or omission in accordance with such advice. The directors shall not be required to
give any bond as such, nor any surety if a bond is obtained.
SECTION 8.3. Liability Insurance.
The Board may obtain general liability and errors and omissions insurance for the
protection of the Board and others in the operation and conduct of TExSTAR in such amounts
as the Board deems adequate to cover foreseeable tort and contract liability. Premiums for
such insurance shall be paid by the Board as an expense of TEXSTAR.
ARTICLE IX
DISSOLUTION
SECTION 9.1. Dissolution.
The Board may dissolve any Fund, or may dissolve TEXSTAR in whole and terminate
the Agreement, on not less than 30 days notice to the Participants, provided that the Board
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makes provision for all liabilities and obligations of the Fund or of the Board and TExSTAR,
respectively, and, in the case of dissolution of TExSTAR, Participants owning two-thirds of the
units in TExSTAR approve the dissolution.. After voting to dissolve and making provision for all
liabilities and obligations of a Fund or of the Board and TExSTAR, the Board shall disburse all of
the assets of the Fund or TExSTAR, respectively, to the Participants in proportion to their units
in the Fund or TExSTAR, respectively. After giving notice of dissolution of a Fund or TExSTAR,
the Board may withhold distributions of earnings from the Fund or TExSTAR, respectively, in
such amounts as it deems advisable to make provision for its liabilities and obligations.
ARTICLE X
AMENDMENTS
SECTION 10.1. Amendments.
These Bylaws may be altered, amended, or repealed or new Bylaws may be adopted by
a majority of the whole Board at any regular or special meeting. No amendment, alteration,
repeal, or replacement shall be effective until 30 days after notice of the same is given to the
Participants and, in the case of any amendment or repeal of Section 7.2 hereof or permitting
dissolution of TUSTAR without the approval of Participants owning two-thirds of the units in
TUSTAR, until approved by Participants owning two-thirds of the units in TExSTAR.
s
April 2009
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