File Nos. 333-05675
811-07665
As filed with the Securities and Exchange Commission on March 27, 2000
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|>
Pre-Effective Amendment No. |_|
Post-Effective Amendment No. 11 |_|
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 |_|
Amendment No. 13 |_|
---------------------
FBR FAMILY OF FUNDS
(Exact Name of Registrant as Specified in Charter)
Potomac Tower
1001 Nineteenth Street North
Arlington, VA 22209
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (703) 312-9583
Robert S. Smith, Esq. Copy To:
Friedman, Billings, Ramsey & Co., Inc. Jack W. Murphy, Esq.
Potomac Tower Dechert Price & Rhoads
1001 Nineteenth Street North 1775 Eye Street, N.W.
Arlington, VA 22209 Washington, D.C. 20006
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
___ immediately upon filing pursuant to
___ paragraph (b) on [date] pursuant to paragraph (b) 60 days
___ after filing pursuant to paragraph (a)(1)
_X_ on June 1, 2000 pursuant to paragraph (a)(1)
___ 75 days after filing pursuant to paragraph (a)(2)
___ on [date] pursuant to paragraph (a)(2) of Rule 485
<PAGE>
THE FBR FAMILY OF FUNDS
CONTENTS OF REGISTRATION STATEMENT
This registration statement consists of the following papers and documents:
- - Cover Sheet
- - Contents of Registration Statement
- - Introduction
- - Supplement to the Prospectus of the FBR Family of Funds and Supplement to
the Statement of Additional Information
- - Part C - Other Information and Signature Page
- - Exhibit Index
- - Exhibits
<PAGE>
Introduction
This Amendment, filed pursuant to Rule 485(a), is being filed for the purpose of
disclosing a proposed new sub-advisory arrangement with respect to the FBR Small
Cap Value Fund, a series of The FBR Family of Funds (the "Trust"). This
Amendment incorporates by reference Trust's the Prospectuses and Statement of
Additional Information as filed with the Securities and Exchange Commission
pursuant to Rule 497 under the Securities Act of 1933 on March 6, 2000.
Except to the extent that the Prospectuses and Statement of Additional
Information are modified by the supplements included with this Amendment, no
changes to the Prospectuses and Statement of Additional Information are being
made or should be viewed as being made by this Amendment.
<PAGE>
FBR FAMILY OF FUNDS
---------------
FBR Financial Services Fund
FBR Small Cap Financial Fund
FBR Small Cap Value Fund
FBR Realty Growth Fund
Supplement dated June 1, 2000 to
Prospectus dated February 28, 2000
Effective June 1, 2000, the Adviser has retained Akre Capital
Management, LLC ("ACM"), 1001 Nineteenth Street North, Arlington, Virginia
22209, to serve as investment sub-adviser to the Small Cap Value Fund. In this
capacity, subject to the supervision of the Adviser and the Board of Trustees,
ACM directs the investment of the Small Cap Value Fund's assets, continually
conducts investment research and supervision for the Small Cap Value Fund, and
is responsible for the purchase and sale of the Small Cap Value Fund's
investments. For these services, the Adviser (and not the Fund) pays ACM a fee
out of the Adviser's advisory fee.
ACM, as a newly-formed registered investment adviser, has not
previously managed an investment company. However, Charles Thomas Akre, Jr., the
managing member of ACM and the portfolio manager of the Small Cap Value Fund,
has substantial investment management experience. Prior to June 1, 2000, Mr.
Akre served as the portfolio manager of the Small Cap Value Fund as a Managing
Director of, or independent contractor to, the Adviser. Mr. Akre is described in
more detail under "Portfolio Managers" on page 10 of the Prospectus.
Investors should retain this Supplement for future reference.
<PAGE>
FBR FAMILY OF FUNDS
---------------
FBR Financial Services Fund
FBR Small Cap Financial Fund
FBR Small Cap Value Fund
FBR Realty Growth Fund
FBR Technology Fund
Supplement dated June 1, 2000 to
Statement of Additional Information dated February 28, 2000
Page 29 of the Statement of Additional Information is revised to add
the following discussion:
Investment Sub-Adviser and Sub-Advisory Agreement
Effective June 1, 2000, the Adviser has retained Akre Capital
Management, LLC ("ACM"), 1001 Nineteenth Street North, Arlington, Virginia
22209, to serve as investment sub-adviser to the Small Cap Value Fund. Charles
Thomas Akre, Jr., the managing member of ACM, has served as portfolio manager of
the Small Cap Value Fund since its commencement of operations.
Under the Sub-Advisory Agreement between the Adviser and ACM, ACM is
responsible for making investment decisions and placing orders for the purchase
and sale of the Fund's investments directly with the issuers or with brokers or
dealers selected by it in its discretion. ACM is responsible for ensuring that
it carries out its sub-advisory responsibilities in a manner consistent with the
investment objectives, policies and restrictions of the Fund as set forth in the
Fund's prospectus and this SAI, the Trust's charter documents, applicable laws,
and such other investment policies, procedures and/or limitations as may be
adopted by the Trust with respect to the Fund. ACM also furnishes such reports,
evaluations, information or analyses to the Adviser and the Trust in connection
with ACM's responsibilities under the Sub-Advisory Agreement as the Trust or the
Adviser may request from time to time. Under the terms of the Sub-Advisory
Agreement, the Adviser will pay ACM an annual fee equal to the greater of (i)
0.40% of the Small Cap Value Fund's average daily net assets (which shall be
accrued daily and paid monthly), or (ii) $3, 500 per month.
Consistent with the requirements of applicable law, the Sub-Advisory
Agreement provides that ACM generally is not liable to the Adviser, the Trust,
the Fund, or to any shareholder of the Fund for any error in judgment or mistake
of law or for any act or omission in the course of, or connected with, rendering
services under the Sub-Advisory Agreement, or otherwise, except by reason of
willful misfeasance, bad faith or negligence, or reckless disregard of its
obligations and duties under the Sub-Advisory Agreement.
The Sub-Advisory Agreement may be terminated by the Adviser or ACM,
without penalty, upon 60 days' prior written notice. In addition, the
Sub-Advisory Agreement may be terminated by the Board of Trustees or by a
majority vote of the Fund's shareholders, without penalty, upon 60 days' prior
written notice. The Sub-Advisory Agreement terminates automatically in the event
of its "assignment" (as defined in the 1940 Act).
The Sub-Advisory Agreement was approved by shareholders on June 1, 2000
and became effective immediately. The Sub-Advisory Agreement will remain in
effect for two years from its effective date, and, unless earlier terminated,
will continue from year-to-year thereafter, provided that each such continuance
is approved annually (i) by the Board or by the vote of a majority of the
outstanding voting securities of the Fund and, in either case, (ii) by a
majority of the Trustees who are not parties to the Sub-Advisory Agreement or
"interested persons" (as defined in the 1940 Act) of any such party.
Investors should retain this Supplement for future reference.
<PAGE>
PART C to FBR Family of Funds N-1A
OTHER INFORMATION
ITEM 23. Exhibits
(a)(1) Certificate of Trust.1
(a)(2) Delaware Trust Instrument dated April 30, 1996.1
(b) Bylaws.1
(c) None.
(d)(1) Form of Investment Advisory Agreement between the Registrant and FBR
Fund Advisers, Inc.2
(d)(2) Form of Notice to Investment Advisory Agreement with respect to the
FBR Realty Growth Fund 4
(d)(3) Form of Notice to Investment Advisory Agreement with respect to the
FBR Technet Fund.8
(d)(4) Form of Investment Sub-Advisory Agreement between FBR Fund Advisers,
Inc. and Akre Capital Management, LLC (filed herewith).
(e)(1) Form of Distribution Agreement between the Registrant and FBR
Investment Services, Inc.4
(e)(2) Form of Notice to Distribution Agreement with respect to the FBR
Realty Growth Fund.4
(e)(3) Form of Notice to Distribution Agreement with respect to the FBR
Technology Fund.8
(e)(4) Form of Selected Dealer Agreement.4
(f) None.
(g)(1) Form of Custodian Agreement between the Registrant and Custodial Trust
Company.2
(g)(2) Form of Notice to Custodian Agreement with respect to the FBR Realty
Growth Fund.4
(g)(3) Form of Notice to Custodian Agreement with respect to the FBR
Technology Fund.8
(g)(4) Form of Sub-Custodian Agreement between Custodial Trust Company and
Citibank N.A.2
(h)(1) Form of Administration Agreement between the Registrant and Bear
Stearns Funds Management Inc.2
(h)(2) Form of Notice to Administration Agreement with respect to the FBR
Realty Growth Fund.4
<PAGE>
(h)(3) Form of Notice to Administration Agreement with respect to the FBR
Technology Fund.8
(h)(4) Form of Administration and Accounting Services Agreement between the
Registrant and PFPC Inc.2
(h)(5) Form of Notice to Administration and Accounting Services Agreement
with respect to the FBR Realty Growth Fund.4
(h)(6) Form of Notice to Administration and Accounting Services Agreement
with respect to the FBR Technology Fund.8
(h)(7) Form of Transfer Agency Services Agreement between the Registrant and
PFPC Inc.2
(h)(8) Form of Notice to Transfer Agent Services Agreement with respect to
the FBR Realty Growth Fund.4
(h)(9) Form of Notice to Transfer Agent Service Agreement with respect to the
FBR Technology Fund.8
(i)(1) Opinion and Consent of Dechert Price & Rhoads.4
(i)(2) Opinion and Consent of Dechert Price & Rhoads with respect to FBR
Technology Fund.8
(j)(1) Consent of Arthur Andersen LLP (filed herewith).
(j)(2) Consent of Deloitte & Touche LLP.5
(k) None.
(l) Investment Letters.2
(m) Form of Rule 12b-1 Distribution Plan.6
(n) None.
(p)(1) Form of Code of Ethics of the Registrant, FBR Fund Advisers, Inc., and
FBR Investment Services, Inc. (filed herewith).
(p)(2) Form of Code of Ethics of Akre Capital Management, LLC (filed
herewith).
(q)(i) Powers of Attorney.7
(q)(ii) Power of Attorney for Winsor H. Aylesworth.6
- ------------
1. Incorporated by reference to the Registrant's Initial Registration
Statement on Form N-1A as filed on June 11, 1996.
2. Incorporated by reference to Pre-Effective Amendment No. 2 to the
Registration Statement as filed on December 20, 1996.
3. Incorporated by reference to Post-Effective Amendment No. 1 to the
Registration Statement as filed on June 27, 1997.
<PAGE>
4. Incorporated by reference to Post-Effective Amendment No. 4 to the
Registration Statement as filed on July 1, 1998.
5. Incorporated by reference to Post-Effective Amendment No. 5 to the
Registration Statement as filed on December 31, 1998.
6. Incorporated by reference to Post-Effective Amendment No. 6 to the
Registration Statement as filed on March 1, 1999.
7. Incorporated by reference to Post-Effective Amendment No. 7 to the
Registration Statement as filed on May 27, 1999.
8. Incorporated by reference to Post-Effective Amendment No. 9 to the
Registration Statement as filed on September 8, 1999.
9. Incorporated by reference to Post-Effective Amendment No. 10 to the
Registration Statement as filed on February 25, 2000.
ITEM 24. Persons Controlled By or Under Common Control with Registrant
None.
ITEM 25. Indemnification
Article X, Section 10.02 of the Registrant's Delaware Trust Instrument, filed as
Exhibit 2 hereto, provides for the indemnification of Registrant's Trustees and
officers, as follows:
"Section 10.02 Indemnification.
(a) Subject to the exceptions and limitations contained in
Subsection 10.02(b):
(i) every person who is, or has been, a Trustee or officer of
the Trust (hereinafter referred to as a "Covered Person") shall be
indemnified by the Trust to the fullest extent permitted by law against
liability and against all expenses reasonably incurred or paid by him
in connection with any claim, action, suit or proceeding in which he
becomes involved as a party or otherwise by virtue of his being or
having been a Trustee or officer and against amounts paid or incurred
by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil,
criminal or other, including appeals), actual or threatened while in
office or thereafter, and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments, amounts
paid in settlement, fines, penalties and other liabilities.
<PAGE>
(b) No indemnification shall be provided hereunder to a Covered
Person:
(i) who shall have been adjudicated by a court or body before
which the proceeding was brought (A) to be liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct
of his office or (B) not to have acted in good faith in the reasonable
belief that his action was in the best interest of the Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office, (A) by the court or other
body approving the settlement; (B) by at least a majority of those
Trustees who are neither Interested Persons of the Trust nor are
parties to the matter based upon a review of readily available facts
(as opposed to a full trial-type inquiry); or (C) by written opinion of
independent legal counsel based upon a review of readily available
facts (as opposed to a full trial-type inquiry).
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall
not be exclusive of or affect any other rights to which any Covered
Person may now or hereafter be entitled, shall continue as to a person
who has ceased to be a Covered Person and shall inure to the benefit of
the heirs, executors and administrators of such a person. Nothing
contained herein shall affect any rights to indemnification to which
Trust personnel, other than Covered Persons, and other persons may be
entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character
described in Subsection (a) of this Section 10.02 may be paid by the
Trust or Series from time to time prior to final disposition thereof
upon receipt of an undertaking by or on behalf of such Covered Person
that such amount will be paid over by him to the Trust or Series if it
is ultimately determined that he is not entitled to indemnification
under this Section 10.02; provided, however, that either (i) such
Covered Person shall have provided appropriate security for such
undertaking, (ii) the Trust is insured against losses arising out of
any such advance payments or (iii) either a majority of the Trustees
who are neither Interested Persons of the Trust nor parties to the
matter, or independent legal counsel in a written opinion, shall have
determined, based upon a review of readily available facts (as opposed
to a trial-type inquiry or full investigation), that there is reason to
believe that such Covered Person will be found entitled to
indemnification under this Section 10.02."
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to trustees, officers, and controlling
persons or Registrant pursuant to the foregoing provisions, or
otherwise, Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Investment Company Act of 1940, as
amended, and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by
Registrant of expenses incurred or paid by a trustee, officer, or
controlling person of Registrant in the successful defense of any
action, suit, or proceeding) is asserted by such trustee, officer, or
controlling person in connection with the securities being registered,
Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
<PAGE>
ITEM 26. Business and Other Connections of Investment Advisers
Information as to the directors and officers of the FBR Fund Advisers, Inc.,
together with information as to any other business, profession, vocation or
employment of a substantial nature engaged in by the directors and officers of
the FBR Fund Advisers, Inc. in the last two years, is included in its
application for registration as an investment adviser on Form ADV (File No.
801-53320) filed under the Investment Advisers Act of 1940 and is incorporated
herein by reference thereto.
Information as to the directors and officers of the Akre Capital Management,
LLC, together with information as to any other business, profession, vocation or
employment of a substantial nature engaged in by the directors and officers of
the Akre Capital Management, LLC in the last two years, is included in its
application for registration as an investment adviser on Form ADV (File No.
801-57156) filed under the Investment Advisers Act of 1940 and is incorporated
herein by reference thereto.
ITEM 27. Principal Underwriters
(a) Not applicable.
(b) Information as to the directors and officers of FBR Investment
Services, Inc. ("Distributor"), together with information as to any
other business, profession, vocation or employment of a substantial
nature engaged in by the directors and officers of the Distributor in
the last two years, is included in its application for registration as
a broker-dealer on Form BD (File No. 008-50280) filed under the
Securities Exchange Act of 1934 and is incorporated herein by reference
thereto.
(c) Not applicable.
ITEM 28. Location of Accounts and Records
The majority of the accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940 (the "1940
Act") and the Rules thereunder are maintained at the offices of PFPC (the
Transfer Agent) and Bear Stearns Funds Management Inc. (the Administrator). The
records required to be maintained under Rule 31a-1(b)(1) with respect to
journals of receipts and deliveries of securities and receipts and disbursements
of cash are maintained at the offices of the Registrant's custodian, as listed
under "Advisory & Other Contracts" in Part B to this Registration Statement.
ITEM 29. Management Services
Not applicable.
ITEM 30. Undertakings
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Post-Effective
Amendment No. 11 to the Registrant's Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Washington,
D.C. on this 24th day of March, 2000.
FBR FAMILY OF FUNDS
By:------------
C. Eric Brugel*
As required by the Securities Act of 1933, this Post-Effective Amendment No. 11
to the Registrant's Registration Statement has been signed by the following
persons in the capacities indicated on the 24th day of March, 2000.
- --------------------- Trustee and President
C. Eric Brugel* (Chief Executive Officer)
- --------------------- Chief Financial Officer and Treasurer
Winsor H. Aylesworth*
- --------------------- Trustee
F. David Fowler*
- --------------------- Trustee
Michael A. Willner*
- -------------------- Trustee
George W. Grosz*
*By /s/ Jack W. Murphy
Jack W. Murphy
Attorney-in-fact
<PAGE>
Exhibits Filed With Post-Effective Amendment No. 11
to the Registration Statement on Form N-1A
for The FBR Family of Funds
EXHIBIT NAME OF EXHIBIT
(d)(4) Form of Investment Sub-Advisory Agreement
(j)(1) Consent of Arthur Andersen LLP
(p)(1) Form of Code of Ethics of the Registrant, Adviser and
Distributor
(p)(2) Form of Code of Ethics of Akre Capital Management, LLC
FORM OF
SUB-ADVISORY AGREEMENT
between
FBR FUND ADVISERS, INC.
and
AKRE CAPITAL MANAGEMENT, LLC
This AGREEMENT made as of the ___ day of _______, 2000, by and between
FBR Fund Advisers, Inc., a Delaware corporation (the "Advisor"), and Akre
Capital Management, LLC, a Delaware limited liability company (the
"Sub-Advisor").
WHEREAS, the FBR Family of Funds, a Delaware business trust (the
"Trust"), is authorized to issue one or more series of shares of beneficial
interest;
WHEREAS, the Trust is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Advisor and the Trust have entered into an Investment
Advisory Agreement ("Primary Agreement") under which the Advisor is obligated to
furnish investment advisory services to the Trust's series, and Section 1(c) of
the Primary Agreement permits the Advisor to, from time to time, retain a
sub-adviser to provide day-to-day portfolio management services to all or part
of a series' investment portfolio;
WHEREAS, the Advisor desires to retain the Sub-Advisor to furnish
day-to-day portfolio advisory services to the Trust's series listed on Schedule
A (each, a "Fund" and collectively, the "Funds"), and the Sub-Advisor represents
that it is willing and possesses legal authority to so furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. Subject to the approval of the Trust's Board of Trustees
(the "Board"), including a majority of the trustees who are not parties
to this Agreement or "interested persons" of any such party
("Independent Trustees"), and each Fund's shareholders, the Advisor
hereby appoints the Sub-Advisor to provide day-to-day advisory services
to each Fund, or to such assets of each Fund as determined by the
Advisor, for the period and on the terms set forth in this Agreement.
The Sub-Advisor accepts such appointment and agrees to furnish the
services described herein for the compensation described herein.
<PAGE>
2. Delivery of Documents. The Sub-Advisor has delivered to the Advisor
copies of each of the following documents along with all amendments
thereto through the date hereof, and will promptly deliver to the
Advisor any future amendments and supplements thereto, if any:
(a) the Sub-Advisor's registration statement, and any amendments
thereto, filed on Form ADV under the Investment Advisers Act of
1940, as amended ("Advisers Act"), as filed with the Securities and
Exchange Commission (the "Commission");
(b) the Sub-Advisor's Trade Allocation Policy; and
(c) the Sub-Advisor's Code of Ethics and Insider Trading Policy.
3. Sub-Advisory Services.
(a) General. The Sub-Advisor hereby agrees to provide day-to-day
portfolio advisory services to the Fund or Funds. The Sub-Advisor
shall regularly provide investment advice to the Fund or Funds, or
to the assets of any such Fund allocated to the Sub-Advisor by the
Advisor, and shall continuously supervise the investment and
reinvestment of cash, securities and other property composing the
assets of the Fund or Funds and, in furtherance thereof, shall, in a
manner consistent with the investment objective and policies of each
Fund as set forth in the Fund's then-current Prospectus and
Statement of Additional Information:
(i) furnish a continuous investment program for each Fund;
(ii)obtain and evaluate pertinent economic, statistical and
financial data, as well as other significant events and
developments, which affect the economy generally, investment
programs of each Fund, and the issuers of securities
included in each Fund's portfolios and the industries in
which each Fund engages, or which may relate to securities
or other investments which the Sub-Advisor may deem
desirable for inclusion in each Fund's portfolio;
(iii) determine which issuers and securities shall be included
in the portfolio of each Fund;
(iv)in its discretion and without prior consultation with the
Advisor, buy, sell, lend and otherwise trade any stocks,
bonds and other securities and investment instruments on
behalf of each Fund; and
(v) take, on behalf of each Fund, all actions the Sub-Advisor
may deem necessary or appropriate in order to carry into
effect such investment program and the Sub-Advisor's
functions as set forth above.
(b) Covenants. The Sub-Advisor shall carry out its investment advisory
and supervisory responsibilities in a manner consistent with the
investment objectives, policies, and restrictions provided in: (i)
each Fund's Prospectus and Statement of Additional Information as
revised and in effect from time to time; (ii) the Trust's Trust
Instrument, Bylaws or other governing instruments, as amended from
time to time; (iii) the 1940 Act; (iv) the Advisers Act; (v) other
applicable laws; and (vi) such other investment policies, procedures
and/or limitations as may be adopted by the Trust with respect to a
Fund and provided to the Sub-Advisor in writing by the Advisor or
the Trust. The Sub-Advisor agrees to use reasonable efforts to
manage each Fund so that it will qualify, and continue to qualify,
as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended, and regulations issued thereunder
(the "Code"), except as may be authorized to the contrary by the
Trust's Board of Trustees. The management of each Fund by the
Sub-Advisor shall at all times be subject to the supervision and
review of the Advisor and the Trust's Board of Trustees.
<PAGE>
(c) Books and Records. The Sub-Advisor agrees that all records which it
maintains for a Fund are the property of the Trust and agrees to
promptly surrender any of such records to the Trust upon the Trust's
or the Advisor's request. The Sub-Advisor further agrees to preserve
for the periods prescribed by Rule 31a-2 under the 1940 Act any such
records of the Funds required to be preserved by such Rule and to
keep all records required to be preserved by the Advisers Act.
(d) Reports, Evaluations and other Services. The Sub-Advisor shall
furnish reports, evaluations, information or analyses to the Advisor
or the Trust with respect to the Funds and in connection with the
Sub-Advisor's services hereunder as the Advisor or the Trust's Board
of Trustees may request from time to time or as the Sub-Advisor may
otherwise deem to be necessary or appropriate. The Sub-Advisor shall
make recommendations to the Advisor or the Trust's Board of Trustees
with respect to Trust policies, and shall carry out all policies
that are adopted by the Board of Trustees. The Sub-Advisor shall,
subject to review by the Advisor and the Board of Trustees, furnish
such other services as the Sub-Advisor shall from time to time
determine to be necessary or appropriate to perform its obligations
under this Agreement. The Sub-Advisor shall cooperate fully with the
Trust's independent auditors and with the Advisor in connection with
any annual audit, the preparation of filings with the Commission,
and in connection with any examination of the Trust or the Advisor
by the Commission.
(e) Aggregation of Securities Transactions. In executing portfolio
transactions for a Fund, the Sub-Advisor may, to the extent
permitted by applicable laws and regulations, but shall not be
obligated to, aggregate the securities to be sold or purchased with
those of other Funds or accounts advised by the Sub-Advisor. The
Sub-Advisor will aggregate trades if, in the Sub-Advisor's
reasonable judgment, such aggregation (i) will result in an overall
economic benefit to the Fund, taking into consideration the
advantageous selling or purchase price, brokerage commission and
other expenses, and trading requirements, and (ii) is not
inconsistent with the policies set forth in the Trust's registration
statement and the Fund's Prospectus and Statement of Additional
Information.
In the event that the Sub-Advisor aggregates any securities
transactions as provided for above, the Sub-Advisor will allocate
the securities so purchased or sold, and the expenses incurred in
the transaction, in an equitable manner, consistent with its
fiduciary obligations to each Fund and such other accounts of the
Sub-Advisor.
(f) Meetings: The Sub-Advisor will meet with the Advisor on a periodic
basis, as reasonably requested by the Advisor, to review the
responsibilities of each party and discuss any operational issues.
<PAGE>
4. Use of Sub-Advisory Performance Information.
(a) With respect to each Fund for which the Sub-Advisor provides
investment advisory service pursuant to this Agreement, the
Sub-Advisor shall permit the Advisor and the Trust to include in the
Trust's Prospectus and/or Statement of Additional Information
performance figures relating to any private accounts and/or
registered investment companies that have substantially similar
investment objectives and policies to a Fund, provided that the
inclusion of any such prior performance satisfies all applicable SEC
rules, regulations, and interpretive positions.
(b) Nothing herein shall prohibit the Sub-Advisor or any of its
principals from using the name of a Fund, the Trust or the Advisor
in a biographical description of the Sub-Advisor or its principals
or prohibit the use of the performance of a Fund or the Trust (to
the extent permissible under the U.S. federal and state securities
laws and regulations) in sales literature, advertising material or
other communications of the Sub-Advisor that describes the composite
performance record of the Sub-Advisor or its principals.
5. Representations and Warranties.
(a) The Sub-Advisor hereby represents and warrants to the Advisor as
follows:
(i) The Sub-Advisor is a limited liability company duly
organized and in good standing under the laws of the State
of Delaware and is fully authorized to enter into this
Agreement and carry out its duties and obligations
hereunder.
(ii)The Sub-Advisor is registered as an investment adviser with
the Commission under the Advisers Act, and is registered or
licensed as an investment adviser under the laws of all
applicable jurisdictions. The Sub-Advisor shall maintain
such registrations or licenses in effect at all times during
the term of this Agreement.
(iii) The Sub-Advisor is not the subject of any administrative
proceeding by any state, federal or other regulatory body.
(iv)The Sub-Advisor at all times shall provide service to the
Funds hereunder using its reasonable best judgment and
efforts to carry out its obligations to the Funds hereunder.
<PAGE>
(b) The Advisor hereby represents and warrants to the Sub-Advisor as
follows:
(i) The Advisor is a corporation duly organized and in good
standing under the laws of the State of Delaware and is
fully authorized to enter into this Agreement and carry out
its duties and obligations hereunder.
(ii)The Advisor is registered as an investment adviser with the
Commission under the Advisers Act, and is registered or
licensed as an investment adviser under the laws of all
applicable jurisdictions. The Advisor shall maintain such
registrations or licenses in effect at all times during the
term of this Agreement.
(iii) The Advisor is not the subject of any administrative
proceeding by any state, federal or any other regulatory
body.
(iv)The Advisor at all times shall provide service to the Funds
using its reasonable best judgement and efforts to carry out
its obligations to the Funds.
(v) To the extent that the Funds incur losses as a result of the
Advisor's failure to adequately fulfill its duties to the
Funds, the Advisor agrees that it shall be solely
responsible to make the Funds whole.
6. Compensation. As compensation for the services which the Sub-Advisor is
to provide pursuant to Paragraph 3, the Advisor shall pay to the
Sub-Advisor the greater of (i) an annual fee, computed and accrued
daily and paid in arrears on the first business day of every month, at
the rate set forth opposite each Fund's name on Schedule A, which shall
be a percentage of the average daily net assets of the Fund (computed
in a manner consistent with the Fund's most recent Prospectus and
Statement of Additional Information) determined as of the close of
business on each business day throughout the month, or (ii) $3,500 per
month. The fee for any partial month under this Agreement shall be
calculated on a proportionate basis.
7. Interested Persons. It is understood that, to the extent consistent
with applicable laws, the Trustees, officers and shareholders of the
Trust are, may be, or may become, interested in the Sub-Advisor as
directors, officers or otherwise, and that directors, officers and
shareholders of the Sub-Advisor are, may be, or may become, similarly
interested in the Trust.
8. Non-Exclusive Services; Limitation of Sub-Advisor's Liability. The
services of the Sub-Advisor provided to each of the Funds are not to be
deemed exclusive and the Sub-Advisor may render similar services to
others and engage in other activities. In the absence of willful
misfeasance, bad faith, negligence or reckless disregard of obligations
or duties hereunder on the part of the Sub-Advisor, or a breach of
fiduciary duty with respect to receipt of compensation, neither the
Sub-Advisor nor any of its directors, officers, shareholders, agents,
or employees shall be liable or responsible to the Advisor, the Trust,
the Funds or to any shareholder of the Funds for any error of judgment
or mistake of law or for any act or omission in the course of, or
connected with, rendering services hereunder or for any loss suffered
by the Advisor, the Trust, a Fund or any shareholder of a Fund in
connection with the performance of this Agreement.
9. Effective Date; Modifications; Termination. This Agreement shall become
effective on _______ , 2000.
(a) This Agreement shall continue in force for an initial term of two
years from its effective date with respect to a Fund. Thereafter,
this Agreement may be renewed as to each Fund for successive annual
periods, provided that the Agreement is approved by the Trust's
Board, including a majority of Independent Trustees.
(b) Notwithstanding the foregoing provisions of this Paragraph 9, either
party hereto may terminate this Agreement at any time on sixty (60)
days' prior written notice to the other, without payment of any
penalty. Such a termination by the Advisor may be effected severally
as to any particular Fund. In addition, this Agreement may be
terminated by the Board of Trustees or, with respect to any Fund, by
a majority vote of the Fund's shareholders, without penalty, upon 60
days' prior written notice. This Agreement shall terminate
automatically in the event of its assignment.
<PAGE>
10. Limitation of Liability of Trustees and Shareholders. The Sub-Advisor
acknowledges the following limitation of liability: The terms "The FBR
Family of Funds" and "Trustees" refer, respectively, to the Trust and
the Trustees, as trustees but not individually or personally, acting
from time to time under the Trust Instrument, to which reference is
hereby made, such reference being inclusive of any and all amendments
thereto so filed or hereafter filed. The obligations of "The FBR Family
of Funds" entered into in the name or on behalf thereof by any of the
Trustees, representatives or agents are made not individually, but in
such capacities and are not binding upon any of the Trustees,
shareholders or representatives of the Trust personally, but bind only
the assets of the Trust, and all persons dealing with the Trust or a
Fund must look solely to the assets of the Trust or Fund for the
enforcement of any claims against the Trust or Fund.
11. Certain Definitions. The terms "assignment," and "interested persons,"
when used herein, shall have the respective meanings specified in the
1940 Act. References in this Agreement to the 1940 Act and the Advisers
Act shall be construed as references to such laws as now in effect or
as hereafter amended, and shall be understood as inclusive of any
applicable rules, interpretations and/or orders adopted or issued
thereunder by the Commission.
12. Independent Contractor. The Sub-Advisor shall for all purposes herein
be deemed to be an independent contractor and shall, unless otherwise
expressly provided herein or authorized by the Board of Trustees of the
Trust or the Advisor from time to time, have no authority to act for or
represent a Fund in any way or otherwise be deemed an agent of a Fund
or of the Advisor.
13. Structure of Agreement. This Agreement is between the Advisor and the
Sub-Advisor and is separate and independent from any agreements between
the Advisor and the Trust. The Sub-Advisor shall have no recourse
against the Trust or any Fund of the Trust. The responsibilities and
benefits set forth in this Agreement shall refer to each Fund severally
and not jointly. No Fund shall have any responsibility for any
obligation of the Advisor arising out of this Agreement. Without
otherwise limiting the generality of the foregoing:
(a) any breach of any term of this Agreement regarding the Advisor with
respect to any one Fund shall not create a right or obligation with
respect to any other Fund;
(b) under no circumstances shall the Sub-Advisor have the right to set
off claims relating to the services to a particular Fund by applying
property of that particular Fund or any other Fund or account
managed by the Sub-Advisor; and
(c) the business and contractual relationships created by this
Agreement, consideration for entering into this Agreement, and the
consequences of such relationship and consideration relate solely to
the Advisor and Sub-Advisor.
This Agreement is intended to govern only the relationships between the
Advisor, on the one hand, and the Sub-Advisor, on the other hand, and
(except as specifically provided above in this Paragraph 13) is not
intended to and shall not govern (i) the relationship between the Trust
and any Fund, (ii) the relationships among the respective Funds, or
(iii) the relationship between the Advisor and the Trust or any of the
Funds.
14. Governing Law. This Agreement shall be governed by the laws of the
State of Delaware, provided that nothing herein shall be construed in a
manner inconsistent with the 1940 Act or the Advisers Act.
15. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder
of this Agreement shall not be affected thereby and, to this extent,
the provisions of this Agreement shall be deemed to be severable.
16. Notices. Notices of any kind to be given to the Advisor hereunder by
the Sub-Advisor shall be in writing and shall be duly given if mailed
or delivered to the Advisor at Potomac Tower, 1001 Nineteenth Street
Ninth, Arlington, Virginia 22209, Attention: _________________ or at
such other address or to such individual as shall be so specified by
the Advisor, or if sent via facsimile, to the recipient's current
facsimile number as contained in the sender's records. Notices of any
kind to be given to the Sub-Advisor shall hereunder by the Advisor be
in writing and shall be duly given if mailed or delivered to the
Sub-Advisor at 1001 Nineteenth Street, Arlington, Virginia 22209,
Attention: Charles T. Akre, Jr. or at such other address or to such
individual as shall be so specified by the Sub-Advisor, or if sent via
facsimile, to the recipient's current facsimile number as contained in
the sender's records. Notices shall be effective upon delivery.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
written above.
FBR FUND ADVISERS, INC. AKRE CAPITAL MANAGEMENT, LLC
By:____________________________ By:____________________________
Name: Name:
Title: Title:
<PAGE>
Schedule A
Name of Fund Fee*
------------ ----
FBR Small Cap Value Fund 0.40%
- -----------
* As a percentage of average daily net assets.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated December 22, 1999
on the October 31, 1999 financial statements of The FBR Family of Funds,
included in the previously filed Form N-SAR dated December 29, 1999, and to all
references to our Firm included in or made part of this Post-Effective Amendment
No. 11 to the Registration Statement File No. 333-05675.
/s/ Arthur Andersen LLP
Vienna, VA
March 23, 2000
FORM OF
FBR FUND ADVISERS, INC.
FBR INVESTMENT SERVICES, INC.
and
THE FBR FAMILY OF FUNDS
CODE OF ETHICS
<PAGE>
TABLE OF CONTENTS
Page
1. Introduction.........................................................1
2. Does the Code Apply to You?..........................................2
3. Who Interprets and Enforces the Code?................................2
4. The Procedures Are Part of the Code..................................3
5. Guidelines for Compliance with Your Ethical Obligations..............3
6. What happens if you Violate the Code or the Procedures?..............7
7. Additional Ethical Considerations You Should Keep in Mind............7
8. Insider Trading Compliance Procedures................................8
Appendix: Rules and Procedures under the Code of Ethics.....................9
1. Introduction.........................................................9
2. Do the Code and Procedures Apply To You?.............................9
3. Definitions..........................................................9
4. General Prohibitions for All Employees..............................11
5. If You Choose to Trade for Your Own Account.........................17
6. Administrative Procedures and Record Keeping Responsibilities of the
Compliance Officer..................................................20
7. Your Securities Transactions Will Be Monitored......................21
8. Annual Seminars.....................................................21
9. Special Reports to Directors........................................22
10. Annual Reports by the Compliance Officer............................22
11. What Can Happen If You Violate the Code.............................22
12. Special Procedures For Accounts in Which Access Persons and Investment
Persons Have an Ownership Interest................................. 23
<PAGE>
Exhibit A: WHAT IS "BENEFICIAL OWNERSHIP"..................................24
A. What is Beneficial Ownership........................................24
B. General Rules As to Beneficial Ownership............................24
C. Examples of Beneficial Ownership....................................26
Exhibit B: The Distinction Between Reportable Securities and
Securities Requiring Prior Approval.............................28
EXHIBIT C: Initial/ANNUAL and Quarterly Reporting Forms....................30
Exhibit D: Initial Acknowledgement Forms...................................34
Exhibit E: Annual Acknowledgement Forms....................................36
Exhibit F: Procedures For The Pre-Clearance Of Personal Securities
Transactions....................................................38
<PAGE>
FBR FUND ADVISERS, INC.
FBR INVESTMENT SERVICES, INC.
and
THE FBR FAMILY OF FUNDS
CODE OF ETHICS
1. Introduction
WHEREAS, FBR Fund Advisers, Inc. (the "Adviser") is a registered
investment adviser under the Investment Advisers Act of 1940 and provides
investment advisory services to investment companies and other clients; and
WHEREAS, the investment advisory business involves decisions and
information that may have at least a temporary impact on the market price of
securities, thus creating a potential for conflicts of interest between
investment advisers and their clients; and
WHEREAS, the Adviser has a fiduciary duty with respect to each
portfolio under management and the interests of the client accounts and of the
shareholders of the Adviser's investment company clients must take precedence
over the interests of the Adviser, its officers and employees, thus requiring
adherence to the highest standards of conduct by the officers and employees of
the Adviser; and
WHEREAS, FBR Investment Services, Inc. (the "Distributor") is a
registered broker-dealer under the Securities Exchange Act of 1934 and serves as
distributor of shares of investment companies;
WHEREAS, practical steps must be taken to ensure that no action is
taken by an officer or employee of the Adviser/Distributor which is, or appears
to be, adverse to the interests of the Adviser/Distributor or any of their
client accounts, including the definition of standards of conduct for such
employees, while at the same time avoiding unnecessary restrictions on the
actions of such officers and employees; and
WHEREAS, The FBR Family of Funds (the "Fund") is an open-end management
investment company, registered under the Investment Company Act of 1940 (the
"1940 Act"); and
WHEREAS, the Fund is advised by the Adviser and the Distributor
distributes shares of the Fund; and
WHEREAS, the Board of Trustees has received a certification from The
FBR Family of Funds that the procedures contained in the following Code of
Ethics (the "Code") and the rules and procedures adopted thereunder (the
"Procedures") are reasonably necessary to prevent access persons from violating
the Code and Procedures; it is
<PAGE>
RESOLVED, that the Board of Directors of the Adviser/Distributor and
the Board of Trustees of the Fund hereby adopt the following Code pursuant to
the provisions of Rule 17j-1 under the 1940 Act, as amended.
2. Does the Code Apply to You?
The Code applies to "employees." Unless otherwise indicated, the term
"employee" means: (1) all officers, directors and employees, including
"investment persons," "portfolio managers" and "access persons," as defined in
the rules and procedures ("Procedures") adopted hereunder, of the
Adviser/Distributor and their affiliates and wholly owned and indirect
subsidiaries and (2) officers, directors (who maintain offices at the
Adviser/Distributor) and employees of the Adviser/Distributor who have an active
part in the management, portfolio selection, underwriting or shareholder
functions with respect to the Adviser's or Distributor's investment company
clients or provide one or more similar services for the Adviser's non-investment
company clients. (Hereinafter, references to the Adviser includes the
Distributor and each of their affiliates).
The term "employee" does not include directors or trustees of any investment
company managed by the Adviser, provided that they do not regularly obtain
current information concerning the investment recommendations or decisions made
by the Adviser on behalf of client accounts ("independent directors"). These
directors may obtain periodic updates of investment decisions after the funds
have effected these transactions.
3. Who Interprets and Enforces the Code?
The Chief Executive Officer of the Adviser shall appoint a Compliance
Officer (the "Compliance Officer") among whose duties will be administration of
the Code of Ethics. The Compliance Officer (or his/her designee) shall have the
responsibility for interpreting the provisions of the Code, for adopting and
implementing Procedures for the enforcement of the provisions of the Code, for
identifying and informing all "access persons" of their reporting obligations,
and for determining whether a violation of the provisions of the Code, or of any
such related Procedures has occurred.
The Compliance Officer (or designee) will monitor personal investment
activity by all "access persons" (as defined in the Procedures attached as the
Appendix), both before and after any trade occurs and will review all securities
transaction and holding reports, conduct education seminars as appropriate,
obtain annual employee certifications as deemed appropriate, and maintain all
appropriate records in the manner and to the extent required under the federal
securities laws. In the event of a finding that a violation has occurred, the
Compliance Officer (or designee) shall take such action as he/she deems
appropriate, which may include recommendations to the Board of Directors of the
Adviser or to the board of any of its affiliates or subsidiaries, on the
imposition of sanctions or initiation of disgorgement proceedings. The
Compliance Officer (or designee) shall also make recommendations and submit
reports to the Boards of Directors/Trustees of the Adviser's investment company
clients regarding any such violations and the actions taken with respect
thereto.
<PAGE>
4. The Procedures Are Part of the Code
From time to time, the Compliance Officer shall, with the consent of
the Fund Board, adopt Procedures to carry out the intent of the Code. Among
other things, the Procedures require certain new employees to complete an Asset
Disclosure Form and such other forms as deemed appropriate by the Compliance
Officer. Such Procedures are hereby incorporated into the Code and are made a
part of the Code. Therefore, a violation of the Procedures shall be deemed a
violation of the Code.
5. Guidelines for Compliance with Your Ethical Obligations
A. General
1. Each officer and employee of the Adviser should undertake to become
informed of and comply strictly with the applicable federal and
state laws and the rules and regulations of any governmental agency
or self-regulatory organization governing his/her actions as an
employee or director of the Adviser.
2. Each officer and employee of the Adviser shall comply with
applicable federal and state laws and regulations and the Friedman,
Billings & Ramsey Group, Inc. Insider Trading Compliance Procedures.
Trading on material non-public information, ("inside information"),
of any sort, whether obtained in the course of research activities,
through a client relationship or otherwise, is prohibited.
3. Each officer and employee of the Adviser shall comply with the
procedures and guidelines established by the Adviser to ensure
compliance with applicable federal and state laws and regulations of
governmental agencies and self-regulatory organizations. No employee
shall knowingly participate in, assist or condone any act in
violation of any statute or regulation governing the Adviser or any
act that would violate any provision of this Code or of the
Procedures adopted hereunder.
4. Each employee and director shall familiarize himself/herself and
shall comply strictly with the provisions of this Code and the
Procedures adopted hereunder.
5. Each employee having supervisory responsibility over other employees
shall exercise reasonable supervision over those employees, with a
view to preventing any violation by such persons of the provisions
of the Code, including the Procedures adopted hereunder, and the
Friedman, Billings & Ramsey Group, Inc. Insider Trading Compliance
Procedures.
6. Any employee who has knowledge that an act in violation of
applicable provisions of the Code, the Procedures or the Friedman,
Billings & Ramsey Group, Inc. Insider Trading Compliance Procedures
has occurred, shall immediately report such evidence to the
Compliance Officer (or designee) of the Adviser. Such action by the
employee will remain confidential, unless the employee waives
confidentiality or federal or state authorities compel disclosure.
Failure to report such evidence may result in disciplinary
proceedings and may include sanctions as set forth in Section 6
hereof.
<PAGE>
B. Your Ethical Obligations
1. Each director/trustee of the Fund will undertake to refrain from
using insider information gained in connection with his/her service
as a director or trading on the basis of information regarding Fund
investments as in the case of an "access person."
2. Each "interested" director/trustee shall file an initial holdings
report, report his/her securities holdings annually, and report any
changes in his or her holdings quarterly, as provided in the
Procedures. An independent director/trustee of the Fund, however,
does not have to submit an initial or annual holdings report. An
independent director/trustee also does not have to submit a
quarterly transaction report, unless he or she knew, or in the
ordinary course of fulfilling his or her official duties as a
director/trustee, should have known, that during the 15-day period
immediately before or after his or her transaction in a "security,"
as defined in the Procedures in Section 3(C), the Fund purchased or
sold the security, or the Fund or the Adviser considered purchasing
or selling the security.
3. Directors/trustees of the Fund shall also adhere to the high
standards of the conduct appropriate to their position and refrain
from any action which would be inconsistent with their obligation to
safeguard the assets of the Fund in accordance with the Fund's
investment policies, and act in the best interests of Fund
shareholders.
4. Officers and employees of the Adviser should conduct themselves in a
manner consistent with the highest ethical and fiduciary standards.
They should avoid any action, whether for personal profit or
otherwise, that is likely to result in a conflict of interest with
the Adviser or its client accounts (as defined in the Procedures
adopted hereunder), or which may be otherwise detrimental to the
interests of the Adviser or its client accounts.1
- ---------------------
1 Conflicts of interest generally result when an individual has a personal
interest in an investment or transaction that is or may be competitive with his
or her responsibilities to other persons or entities (such as the Adviser or its
client accounts) or where an individual has competing obligations or
responsibilities to two or more persons or entities. In the case of the
relationship between a client account and the Adviser or its officers, directors
and employees, such a conflict may result from the purchase or sale of
securities for a client account and for the personal account of the individual
involved or the account of any "affiliate" (e.g., relative, partnership) of that
individual as the term is defined in the 1940 Act. A conflict may also arise
from the purchase or sale for a client account of securities in which an
officer, director or employee of the Adviser has a pre-existing economic
interest. A conflict may also arise from a vendor relationship in which an
employee has a direct (or indirect) financial, family, or other personal
interest. Conflicts of interest between the Adviser and a vendor should be
resolved by the employee in a manner that is not disadvantageous to the Adviser.
Potential or actual conflicts must be disclosed to the Adviser. Every effort
should be made to avoid such conflicts of interest wherever possible and, where
they occur, to resolve them in a manner that is not disadvantageous to a client.
<PAGE>
5. Officers and employees of the Adviser should act in a manner
consistent with their fiduciary obligation to clients of the
Adviser, and shall not deprive any client account of an investment
opportunity in order to personally benefit from that opportunity.
6. Without the knowledge and approval of the Compliance Officer (or
designee) of the Adviser, officers and employees of the Adviser
shall not engage in a business activity or practice for compensation
in competition with the Adviser or its advised accounts. Each
employee who is deemed to be an "investment person" as defined in
the Procedures shall obtain the written approval of the Adviser's
Compliance Officer (or designee) to participate on a board of
directors/trustees or governing board of any the following
organizations:
. any publicly traded company, partnership or trust; or any
such privately held entity that is likely to seek public
funds through a securities offering;
. any hospital or philanthropic institution;*
. any local or state municipal authority;* and/or
. any charitable organization.*
* These restrictions relate to organizations that have raised
or intend to raise money in a public securities offering.
7. Each officer or employee of the Adviser, in making an investment
recommendation or taking any investment action, shall exercise
appropriate diligence and thoroughness, and shall have a reasonable
basis for any such recommendation or action.
8. Each officer or employee of the Adviser and director/trustee of the
Funds shall not attempt to improperly influence, for his or her
personal benefit, any investment strategy to be followed or
investment action to be taken by the Adviser for its client
accounts.
9. Each officer or employee of the Adviser and director/trustee of the
Funds shall not improperly use, for his or her personal benefit any
knowledge, whether obtained through such person's relationship with
the Adviser or otherwise, of any investment recommendation made or
to be made, or of any investment action taken or to be taken by the
Adviser for its client accounts.
<PAGE>
10. Officers and employees of the Adviser and independent
directors/trustees of the Funds shall not disclose non-public
information relating to a client account, portfolio or transactions
or to the investment recommendations of the Adviser, nor shall any
officers or employee of the Adviser or Fund director/trustee
disclose any non-public information relating to the business or
operations of the Adviser, unless properly authorized to do so.
11. Officers and employees of the Adviser shall not accept, directly or
indirectly, from a broker-dealer or other vendor who transacts
business with the Adviser or provides services to its client
accounts, any gifts, gratuities or other things of such value or
significance that their acceptance might reasonably be expected to
influence the individual's exercise of independent and objective
judgment in carrying out his or her duties or otherwise gives the
appearance of impropriety.
12. Each officer or employee of the Adviser who is deemed to be an
"investment person" as defined in the Procedures shall not acquire
securities for an account in which he/she has a direct or indirect
beneficial interest in an initial public offering ("IPO") or on
behalf of any person, entity or organization that is not a client of
the Adviser.
13. All personal securities transactions of officers or employees of the
Adviser must be conducted in accord with the provisions of this Code
and the Procedures, and in a manner which will avoid any actual or,
insofar as possible, potential conflicts of interest or any abuse of
such employee's position of trust and responsibility. Unless an
exemption is available, officers and employees who are deemed to be
"access persons" as defined in the Procedures, shall pre-clear all
transactions in securities in accordance with the provisions of the
Procedures.
14. Each officer or employee of the Adviser, who is deemed to be an
"investment person" as defined in the Procedures shall refrain from
engaging in personal securities transactions in connection with any
security that is not registered under Section 12 of the Securities
Act of 1933 (i.e., a private placement security) or in a limited
offering as defined in the Procedures unless such transaction has
been pre-approved by the Compliance Officer (or designee).
<PAGE>
15. Officers and employees who are deemed to be "access persons" as
defined in the Procedures shall not execute a parallel transaction
in connection with the purchase or sale of a security on any day
during which any of the Adviser's clients, including investment
company clients, has a pending buy or sell order in the same
security, until that order is executed or withdrawn. In addition,
employees who are deemed to be "investment persons" as defined in
the Procedures, may not engage in a transaction in connection with
the purchase or sale of a security within seven (7) calendar days
before and after an investment company client of the Adviser trades
in that security.
16. Each officer or employee, who is deemed to be an "investment person"
as defined in the Procedures, may not purchase and voluntarily sell
or sell and voluntarily purchase the same (or equivalent) securities
of the same issuer within 30 calendar days of a trade by one or more
client accounts unless such employee complies with the disgorgement
procedures set forth in the Procedures. Any transaction under this
provision will result in disgorgement proceedings for any profits
received in connection with such transaction by such employee.
6. What Happens if You Violate the Code or the Procedures?
Employees violating the provisions of the Code or any Procedures may be
subject to sanctions, which may include, among other things, restrictions on
such person's personal securities transactions; a letter of admonition,
imposition of an education requirement or formal censure; fines, suspension,
reassignment, demotion or termination of employment; or other significant
remedial action. Employees may also be subject to disgorgement proceedings for
transactions in securities that are inconsistent with Sections (5)(B)(15)-(16)
above.
7. Additional Ethical Considerations You Should Keep in Mind
The Friedman, Billings & Ramsey Group., Inc. Insider Trading Compliance
Procedures, this Code and the related Procedures under the Code cannot, and do
not, cover every situation in which choices and decisions must be made, because
other company policies, practices and procedures (as well as good common sense)
and good business judgment also apply. Officers and employees of the Adviser and
Fund directors/trustees should read and understand these documents thoroughly.
They present important rules of conduct and operating controls for all officers
and employees. Officers and employees are also expected to present questions to
their supervisors and, where warranted, to the Compliance Officer (or designee)
for his/her advice or disposition and to report suspected violations as set
forth above.
8. Insider Trading Compliance Procedures
The Friedman, Billings & Ramsey Group, Inc. Insider Trading Compliance
Procedures apply to all employees and other persons associated with the Adviser,
the Distributor or the Fund. All such persons are expected to request a copy of
this document, if a copy has not already been provided to you.
FBR Investment Services, Inc. FBR Fund Advisers, Inc.
By: _____________________________ By: __________________________
_____________________________ __________________________
Date Date
The FBR Family of Funds
By: __________________________
__________________________
Date
<PAGE>
Appendix: Rules and Procedures under the Code of Ethics
FBR FUND ADVISERS, INC.
FBR INVESTMENT SERVICES, INC.
and
THE FBR FAMILY OF FUNDS
Rules And Procedures Adopted Under The Code Of Ethics
1. Introduction
These rules and procedures (collectively, "Procedures") have been
adopted by FBR Fund Advisers, Inc. (the "Adviser"), FBR Investment
Services, Inc. (the "Distributor") and The FBR Family of Funds (the
"Fund") to carry out the intent of the Code of Ethics of the Adviser,
the Distributor and the Fund (the "Code") and are incorporated by
reference into and made a part of the Code. The Code has been approved
by the Adviser, the Distributor and by the Board of Trustees of the
Fund.
The Compliance Officer (or designee) has the responsibility for
interpreting the provisions of the Code, for adopting and implementing
these Procedures, and for determining whether a violation of the
provisions of the Code or of these Procedures has occurred and, if so,
for imposing appropriate sanctions. Further, the Code authorizes the
Compliance Officer (or designee) to adopt procedures, rules and
guidelines designed to establish, maintain and enforce written policies
and procedures reasonably designed to prevent the misuse of material
non-public information.
2. Do the Code and Procedures Apply To You?
All employees, directors/trustees, officers or general partners of the
Fund, Adviser and Distributor should review the Code and Procedures.
Hereinafter, references to the Adviser include the Distributor and
their affiliates. Any questions regarding the Code or the Procedures
should be referred to the Compliance Officer (or designee) of the
Adviser.
3. Definitions
For purposes of these Procedures, the following terms shall have the
meanings set forth below:
A. "Beneficial Ownership" means:
. having or sharing, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise, a direct or
indirect pecuniary interest in any class of equity securities.
. The term "pecuniary interest" means the opportunity, directly or
indirectly, to profit or share in any profit derived from a
transaction in the subject securities.
<PAGE>
Generally, a person will be regarded as having a direct or indirect
beneficial ownership interest in securities held in his/her name, as
well as in the name of a spouse, minor children who live with such
person, and any other relative (parents, adult children, brothers,
sisters, in-laws, etc.) who shares the same household with such person.
See Exhibit A to these Procedures for a more complete description of
beneficial ownership, as well as examples of beneficial ownership.
B. "Employee" has the same meaning as set forth in Section 2 of the
Code. In addition, the following definitions apply:
1. "Access Person" includes any director, officer, or general
partner of the Fund or Adviser as well as any employee of the
Fund or Adviser (or of any company, in a control relationship to
the Fund or Adviser) who, in connection with his or her regular
functions or duties, makes, participates in, or obtains
information regarding the purchase or sale of securities by the
Fund, or whose functions relate to the making of any
recommendations with respect to the purchases or sales; and any
natural person in a control relationship to the Fund or Adviser
who obtains information concerning recommendations made to the
Fund with regard to the purchase or sale of securities by the
Fund.
2. "Investment Person" includes all directors and officers of the
Adviser and any employee of the Fund or Adviser (or of any
company in a control relationship to the Fund or Adviser) who,
in connection with his or her regular functions or duties, makes
or participates in making recommendations regarding the purchase
or sale of securities by the Fund (i.e., traders, ----
securities analysts as well as all "portfolio managers") and any
natural person who controls the Fund or Adviser and who obtains
information concerning recommendations made to the Fund
regarding the purchase or sale of securities by the Fund.
3. "Portfolio Manager" includes those employees who actively
participate in the portfolio selection, monitoring and reporting
with respect to one or more of the Adviser's client accounts.
4. "Client Accounts" includes all private accounts and investment
companies who have entered into investment management,
administrative and advisory agreements or sub-advisory
agreements with one or more of the members of the Adviser as
described in the Code.
5. "Affiliated Accounts" includes all partnerships, hedge funds and
similar accounts in which all access persons in the aggregate
directly or indirectly own 5% or more.
<PAGE>
C. "Security" means any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, certificate of interest or participation
in any profit-sharing agreement, collateral-trust certificate,
pre-organization certificate or subscription, transferable share,
investment contract, voting-trust certificate, certificate of
deposit for a security, fractional undivided interest in oil, gas or
other mineral rights, any put, call, straddle, option or privilege
on any security or on any group or index of securities (including
any interest therein or based on the value thereof), any put, call,
straddle, option or privilege entered into on a national securities
exchange relating to foreign currency, or, in general, any interest
or instrument commonly known as a "security," or any certificate of
interest or participation in, temporary or interim certificate for,
receipt for, guarantee of, or warrant or right to subscribe to or
purchase, any of the foregoing. With respect to the reporting
requirements for access persons, "security" does not mean: direct
obligations of the U.S. government; --- bankers' acceptances, bank
certificates of deposit, commercial paper and high quality
short-term debt instruments, including repurchase agreements; and
securities issued by mutual funds.
1. "Equivalent Security" means a security that: (1) is convertible
into another security or (2) gives its holder the right to
purchase another security of the same issuer. For example, a
bond or preferred stock may be convertible into another security
of the same issuer, or an option or warrant may give the holder
the right to purchase stock of the same issuer.
D. "Reportable Security" means any security that must be reported to
the Compliance Officer (or designee) after execution of a trade (see
Exhibit B for examples).
E. "Security Requiring Prior Approval" means any reportable security
that must be pre-cleared by the Compliance Officer (or designee)
prior to execution of a trade (see Exhibit B for examples).
4. General Prohibitions for All Employees
The Adviser and the Fund have determined that the following courses of
conduct are prohibited for all the Adviser's employees:
A. Insider Trading
Every employee is forbidden from trading, either personally or on
behalf of others (including client accounts managed by the Adviser),
on material non-public information or communicating material
non-public information to others in violation of the law. This
conduct is frequently referred to as "insider trading." This policy
applies to every employee of the Adviser and extends to activities
within and outside their duties at the Adviser. See the Friedman,
Billings & Ramsey Group, Inc. Insider Trading Compliance Procedures
for a description of "insider trading" and special procedures that
are designed to detect and prevent "insider trading."
<PAGE>
B. Transactions in Securities on the Restricted List
From time to time, employees may obtain material, non-public
information or establish special or "insider" relationships with one
or more issuers of securities (i.e., the employee may become an
officer or director of an issuer, a member of a creditor committee
that engages in material negotiations with an issuer, etc.). In
these cases, the Compliance Officer (or designee) may maintain a
"Restricted List" containing the names of issuers whose securities
are not eligible for purchase or sale by employees and/or client
accounts.
Employees who are deemed to be access persons may not trade, either
personally or on behalf of client accounts of the Adviser, in a
security of an issuer appearing on the Restricted List. With respect
to personal transactions of employees, the Compliance Officer (or
designee) will advise each employee during the prior approval
process if a security appears on the Restricted List. With respect
to trading on behalf of client accounts, the Compliance Officer (or
designee) will advise the portfolio managers thereof in writing when
any issuers are added to or deleted from the Restricted List.
C. Gifts
Except as noted below, an employee shall not solicit or accept from
a broker/dealer or other vendor that transacts business with the
Adviser or its client accounts any gifts or gratuities or other
things of value. For this purpose, gifts and gratuities and other
things of value do not include unsolicited entertainment (including
meals or tickets to cultural or sporting events) that are not so
frequent or extensive as to raise any question of impropriety. An
employee may not accept unsolicited gifts or other things of more
than de minimis value from any person or entity that does business
with or on behalf of an investment company client account. In any
such case, the value may not exceed $100 per giver per year.
D. Outside Employment
Employees shall not undertake a business activity or practice for
compensation that is in competition with the Adviser unless they
have received the written consent of the Compliance Officer (or
designee) of the Adviser. For this purpose, "business activity or
practice" includes any service that the Adviser currently makes
available for compensation. In addition, employees who are deemed to
be investment persons are prohibited from serving on the board of
directors/trustees of certain organizations without prior written
approval from the Compliance Officer (or designee) (see Section
5(B)(6) of the Code). In the relatively small number of instances in
which board service is authorized, investment persons serving as
directors normally should be isolated from those making investment
decisions through "Chinese Wall" or other procedures.
<PAGE>
Employees shall also avoid any action, whether for personal profit
or otherwise, that results in an actual or potential conflict of
interest with the Adviser or its client accounts, or which may be
otherwise detrimental to the interest of the Adviser or its client
accounts. Such conflict may also arise from the purchase and sale
for a client account of securities in which an officer, director or
employee of the Adviser has an economic interest. Moreover, such
conflict may arise in connection with vendor relationships in which
such employee has any direct or indirect financial interest, family
interests or other personal interest. Such conflicts must be
resolved in favor of the Adviser's client, or if a vendor, in favor
of the Adviser.
E. Failure to Report Security Holdings
Upon commencement of duty with the Adviser, each investment and
access person shall disclose, on the appropriate form, all holdings
of securities to the Compliance Officer (or designee). An employee
who is deemed to be an investment person shall not cause or attempt
to cause client accounts to acquire or dispose of any such security
(including any option, warrant or other right or interest relating
to such security) unless the employee shall first disclose to the
Compliance Officer (or designee) all facts reasonably necessary to
assure that any conflicts of interest relating to such security are
resolved in a manner that is not disadvantageous to client accounts.
The disclosures as described above are intended to bring to the
attention of the Compliance Officer (or designee) any actual or
apparent conflicts of interest and to prevent employees from
exerting, or appearing to exert, improper influence on the
management of client accounts.
F. Depriving Client Accounts of Investment Opportunities
The failure of an employee who is deemed to be a portfolio manager
to recommend an investment opportunity to, or to purchase an
investment opportunity for, a client account in order to obtain a
personal benefit will be considered a course of conduct that
deprives a client account of an investment opportunity. Therefore,
such conduct will be considered to be a violation of Section 5(B)(5)
of the Code. An example of this type of prohibited conduct is to
effect a personal transaction in a security and to intentionally
fail to recommend, or to fail to effect, a suitable client account
transaction in such security in order to avoid the appearance of a
conflict of interest.
<PAGE>
G. "Scalping" or "Front-Running"
Employees shall not acquire or dispose of beneficial ownership of a
security if such acquisition or disposition is based upon the
employee's knowledge of actions already taken, being taken or being
considered by the Adviser on behalf of any of its client accounts.
Such prohibited conduct will be considered to violate one or more of
Sections 5(B)(3), 5(B)(4) and 5(B)(9) of the Code. Examples of this
type of prohibited conduct include:
. for personal gain, an employee uses knowledge of a future
purchase of a security by a client account and buys the security
or acquires direct or indirect beneficial ownership of the
security before the client account buys the security; or
. for personal gain, an employee uses knowledge of a future sale
of a security by a client account and sells the security for any
account with respect to which the employee is the direct or
indirect beneficial owner before the client account sells the
security (e.g., the employee sells short a security based on
knowledge of a future sale of the security by a client account).
H. Fraudulent Conduct
Employees, in connection with the purchase or sale, directly or
indirectly, of a security held or to be acquired2 by the Fund may
not:
. employ any device, scheme or artifice to defraud the Fund;
. make any untrue statement of a material fact to the Fund or omit
to state a material fact necessary in order to make the
statements made to the Fund, in light of the circumstances under
which they are made, not misleading;
. engage in any act, practice or course of business that operates
or would operate as a fraud or deceit on the Fund; or
. engage in any manipulative practice with respect to the Fund.
I. Restricted Trading Periods ("Blackout Periods")
1. Same Day Restriction
Employees who are deemed to be "access persons" are
prohibited from executing a parallel securities transaction
on any day during which a client account has a pending "buy"
or "sell" order in the same (or equivalent) security of the
same issuer, until that order is executed or withdrawn.
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2 A "security held or to be acquired" means: (1) any security which, within the
most recent 15 days (a) is or has been held by the Fund; or (b) is being or has
been considered by the Fund or FBR Fund Advisers, Inc. for purchase by the Fund;
and (2) any option to purchase or sell, and any security convertible into or
exchangeable for, a security described in Section 3(c) of the Procedures.
<PAGE>
Exceptions
Notwithstanding anything to the contrary, an access person may
engage in transactions in the same securities or similar securities
as the Funds provided that (1) the transactions are aggregated and
(2) in the opinion of the trader and the Compliance Officer, the
transaction is not likely to adversely affect the price at which the
Funds' order will be executed.
Generally, transactions in securities with an average monthly
trading volume of $100 million or more shall be presumed to meet
these criteria. In addition, an access person may engage in
transactions in mutual fund shares and U.S. government securities
without regard to the blackout period.
2. Seven-Days Restriction
Employees who are deemed to be access persons are prohibited from
buying or selling a security for seven calendar days after a client
account executes an opposite trade in the same (or equivalent)
security of the same issuer. For example if a client account sold a
security within the last seven calendar days, access persons would
be prohibited from buying the same (or equivalent) security of the
same issuer. (Note: The day of the last client account trade is
counted as the first day of this seven calendar day period.)
Employees who are deemed to be investment persons are prohibited
from buying or selling a security within at least seven calendar
days before or after a client account trades in the same (or
equivalent) security of the same issuer. (Note: The day of the last
client account trade is counted as the first day of this seven
calendar day period.) If any client account purchases or sells a
security within seven days before or after a trade by an investment
person, the Compliance Officer (or designee) will require that the
employee take such action as necessary to unwind, reverse or
disgorge such securities. The Compliance Officer (or designee) will
direct the employee to disgorge any profits obtained as a result of
such subsequent trade.
Depending on the circumstances in each case, it may be appropriate
for the Compliance Officer (or designee) to impose a "cooling-off
period" longer or shorter than the seven calendar day period
described above. Some of these circumstances could include whether
the security is thinly traded, the number and dollar volume of
transactions of employees and client accounts, and the employee's
level of involvement in the investment process.
3. 30-Days Restriction
Employees who are deemed investment persons are prohibited from
profiting from the purchase and voluntary sale, or sale and
voluntary purchase, of the same (or equivalent) securities within 30
calendar days of a trade by one or more client accounts.
. Any such short-term trade will be investigated by the
Compliance Officer (or designee) who shall render a finding
and determine the appropriate disposition of the matter.
. Any profits realized upon such disposition are subject to
disgorgement under such rules as adopted by the Adviser.
. The Adviser may adopt rules providing for hardship
exceptions upon application on a case-by case basis.
Note: Notwithstanding the above, it is the Adviser's judgment
that excessive short-term trading can be a time-consuming
distraction, can interfere with an employee's ability to
perform his/her duties in a diligent and thorough manner and
can act in a manner inconsistent with the Adviser's
fiduciary duty to clients. Such trading increases the
possibility of actual or apparent conflicts of interests.
<PAGE>
J. Disclosure of Confidential Information
Except in the ordinary course of assigned duties, employees shall
not disclose to any non-employee or other non-member of the Adviser
information concerning particular securities that are held or being
considered for purchase or sale by client accounts, any information
concerning client accounts or any other information deemed
confidential by the Adviser.
K. Purchase of Non-Investment Grade Corporate Bonds Held in Client
Accounts
Employees who are deemed to be access persons shall not acquire
direct or indirect beneficial ownership of a corporate bond if, at
the time of such acquisition, any debt security of the issuer of
such bond is held in a client account and such corporate bond is
rated less than investment grade by either Moody's Investors
Services ("Moody's") or Standard and Poor's ("S&P"). (Note: for this
purpose, a bond that is not rated by either Moody's or S&P will be
treated as a bond that is rated less than investment grade.)
L. New Issue Purchases During an Initial Public Offering
Employees who are deemed to be investment persons shall not acquire
direct or indirect beneficial ownership of, or otherwise purchase,
securities issued during an initial public offering ("IPO").
M. Private Placements
Employees who are deemed to be investment persons are prohibited
from acquiring an unregistered security issued in a private
placement (or limited offering) without the prior written approval
of the Compliance Officer (or designee). Under normal circumstances,
such approval will not be withheld if the employee demonstrates in
writing that: (1) the investment is not suitable for one or more
client accounts; (2) the investment opportunity was unique to the
individual circumstances of the employee; (3) the investment did not
involve employment with the Adviser as a consideration by the
offeree; and (4) no overreaching would or could occur. Investment
persons who have been authorized to acquire securities in a private
placement must disclose such investment to the Compliance Officer
(or designee) when such investment person plays a part in any
subsequent consideration of any investment in the issuer by a client
account. The decision to purchase securities of the issuer for a
client account shall be subject to an independent review by the
Compliance Officer (or designee).
A limited offering means an offering that is exempt from
registration under the Securities Act of 1933 pursuant to Section
4(2) or Section 4(6), or pursuant to Rules 504, 505 or 506 under the
Securities Act of 1933.
5. If You Choose to Trade for Your Own Account
A. Your Reporting Obligations When You Open a Brokerage Account
Each "access person" shall supply to the Compliance Officer (or
designee) a completed Asset Disclosure Form (see Exhibit C),
identifying all brokerage, company and other institutional accounts
subject to the Code and related Procedures in which the employee has
a direct or indirect beneficial ownership interest, as defined in
Section 3(A) above.
Each employee is required to provide an updated Asset Disclosure
Form to the Compliance Officer (or designee) at any time the
employee opens or closes any brokerage, company or other
institutional account in which he/she has a direct or indirect
beneficial ownership interest.
<PAGE>
B. Get Clearance Before You Trade
1. Each employee who is deemed to be an access person shall obtain
written approval from the Compliance Officer (or designee) prior
to buying or selling a security requiring prior approval. This
requirement applies to the purchase or sale of each security
requiring prior approval in which the employee has a direct or
indirect beneficial ownership interest such as purchases or sales
for the account(s) of the employee, his/her spouse or minor
children, or for accounts of a trust for which the employee is a
trustee or in which the employee has a direct or indirect
beneficial ownership interest.
2. In the absence of the Compliance Officer (or designee),
pre-clearance may be obtained from an executive officer of the
Adviser.
3. Notwithstanding Section 5(B)(1) above, an employee shall not be
required to obtain prior approval for transactions in securities
that are (a) made for any account(s) over which the employee has
no direct or indirect beneficial interest, influence or control,
(b) made in shares of mutual funds, U.S. government securities or
money market instruments, and (c) made for non-Affiliated
Accounts.
4. Employees seeking pre-clearance of securities transactions shall
complete Part I of the Pre-Clearance Form (see Exhibit G) and
submit the form to the Compliance Officer (or designee).
Employees who are not located at the home office of the Adviser
may either fax the completed form or verbally provide the
Compliance Officer (or designee) with the information necessary
to complete Part I of the form.
For the purpose of approving or disapproving the securities
transactions of employees, the Compliance Officer (or designee)
shall follow the pre-clearance procedures set forth in Exhibit G,
and such other procedures approved by the Adviser for internal
control purposes.
5. Securities transactions in discretionary accounts of access
persons must also be approved by the Compliance Officer (or
designee) prior to execution of the trade if the security
requires prior approval, as defined herein. The employee must
provide a copy of the discretionary agreement to the Compliance
Officer (or designee) upon commencement of employment or upon a
discretionary account.
C. Report Your Transactions
1. General Reporting Requirements
Each access person shall submit, at the time of employment,
quarterly, as appropriate, and annually to the Compliance Officer
(or designee) a report of every position held in a reportable
security with respect to which the access person has a direct or
indirect beneficial ownership interest.
<PAGE>
The initial holding report must be submitted no later than 10
days after the person becomes an access person.
Notwithstanding the above provisions, an access person shall not
be required to report transactions in reportable securities for
any account over which the employee has no direct or indirect
beneficial interest, influence or control, or, as to the
quarterly reports, nonvolitional transactions.
2. Provision of Duplicate Confirmations
The quarterly reporting requirement for access persons described
in Section 5(C)(1) above may be satisfied through the provision
of duplicate confirmations and monthly/quarterly brokerage
statements to the Compliance Officer (or designee) no later than
10 days after the end of the relevant calendar quarter, if all
the required information is contained in the confirmations or
account statements, or is in the records of the Fund or Adviser.
In any event, access persons are required to provide duplicate
confirmations and monthly/quarterly brokerage statements for all
transactions in reportable securities. The Compliance Officer (or
designee) will request each broker/dealer identified on an
employee's current Asset Disclosure Form to provide duplicate
confirmations and monthly/quarterly brokerage statements for all
securities transactions in the employee's account(s). Therefore,
it is incumbent upon each employee to make certain that his/her
Asset Disclosure Form is maintained on a current basis (i.e., all
of the employee's brokerage, company and other institutional
accounts are identified) and provided to the Compliance Officer
(or designee) in a timely manner. Failure to keep such Asset
Disclosure Form current shall result in disciplinary action.
In cases where it is not possible for the access person's
broker/dealer or other institution to provide duplicate
confirmations to the Compliance Officer (or designee) for
transactions in reportable securities (or in case confirmations
are otherwise not available or the information contained in them
does not provide all the required information and the required
information is not in the Fund's or Adviser's records), the
employee is required to furnish a Transaction Report (see Exhibit
C) to the Compliance Officer (or designee) no later than 10 days
after the end of the calendar quarter in which the transaction
took place.
3. Annual Disclosure of Your Personal Securities Holdings
Employees who are deemed to be access persons must verify
annually (as of each December 31) all holdings of personal
securities and other financial property for which they have
direct or indirect beneficial interest.
The information provided must be current as of a date no more
than 30 days before the report is submitted.
Each employee who is deemed an access person must provide to the
Compliance Officer (or designee) a complete report, on the Asset
Disclosure Form (see Exhibit C), listing each of the securities
held for which the employee has direct or indirect beneficial
ownership. Subsequent revised lists must be provided to the
Compliance Officer (or designee) no later than 20 calendar days
(after December 31 of each subsequent year).3 In the event that
no securities are held as of the above reporting dates, the
report should specify that such employee did not hold securities
on the respective reporting date. This report should include book
entry shares held at companies, broker/dealers, investment
advisers or other institutions and physically issued certificates
held in a safe deposit box, at one's home, or in the trust
department of a bank or trust company.
<PAGE>
6. Administrative Procedures and Record Keeping Responsibilities of the
Compliance Officer
A. Who Gets a Copy of the Code of Ethics and Procedures?
Upon commencement of duty with the Adviser, each new employee shall
receive a copy of the Code and related Procedures, and the Friedman,
Billings & Ramsey Group, Inc. Insider Trading Compliance Procedures.
Thereafter, each such employee shall file an Initial Acknowledgment
Statement (see Exhibit D) with the Compliance Officer (or designee) in a
timely manner, indicating that he/she has read and understands the Code,
the Friedman, Billings & Ramsey Group, Inc. Insider Trading Compliance
Procedures, and the Procedures under the Code.
The employee must also attend an orientation session with respect to the
Code and related Procedures within 30 days of employment unless a
supervisor requests in writing that a 30-day extension of time be
granted in order to complete current business.
On an annual basis, each employee shall file with the Compliance Officer
(or designee) an Annual Acknowledgment Statement (see Exhibit E)
indicating that the employee has reviewed and understands the provisions
of the Code, the Procedures and the Friedman, Billings & Ramsey Group,
Inc. Insider Trading Compliance Procedures, and that he/she has complied
and will continue to comply, with the requirements thereof, unless
otherwise previously disclosed to the Compliance Officer (or designee).
- -----------------------
3 If an access person has kept an accurate "running count" of his or her
holdings throughout the year, the annual update requirement may be satisfied by
a written (or electronic), dated confirmation that the recorded information
accurately reflects his or her holdings.
B. Record Keeping Responsibilities of the Compliance Officer
The Compliance Officer (or designee) shall be responsible for
maintaining custody of the following records in an easily accessible
place for a period of five years:
. the current Code as well as each Code that was in effect at any time
within the past five years;
. a copy of each report made by an access person, including any
information provided in lieu of the reports, pursuant to the
requirements of Section 5(C) of these Procedures;
. lists of all persons, currently or within the past five years, who
are or were required to make reports under Section 5(C) of these
Procedures, or who are or were responsible for reviewing these
reports;
. a copy of each annual report from the Compliance Officer to the
Fund's Board of Trustees, as described in Section 10(A).
. all Pre-Clearance Forms relating to the personal securities
transactions of employees and the records relating to any decision,
and the reasons supporting it, to approve the acquisition of
investments in limited offerings;
. a written record of each violation of the Code or related
Procedures, and a written record of any action taken as a result of
each such violation; and
. all employee Acknowledgment Statements referred to in Section
5(C)(3) of the Procedures.
<PAGE>
7. Your Securities Transactions Will Be Monitored
The duplicate confirmations supplied to the Compliance Officer (or designee)
pursuant to Section 5(C)(2) of these Procedures shall be reviewed by the
Compliance Officer (or designee) to monitor compliance with the Code and
related Procedures. The Compliance Officer (or designee) shall develop
review procedures necessary to ensure compliance with the Code, the
Procedures, and the Friedman, Billings & Ramsey Group, Inc. Insider Trading
Compliance Procedures.
The Compliance Officer (or designee) also will establish and review
procedures with respect to monitoring all personal security transactions by
employees and make periodic reports to the Boards of Directors/Trustees of
the Adviser's investment company clients, as appropriate.
8. Annual Seminars
Annually, the Compliance Officer (or designee) will conduct a seminar for
the purpose of reviewing with all employees the Code and related Procedures.
Attendance at the Annual Review is mandatory. It is the responsibility of
each supervisor to ensure that employees subject to such person's submission
attend the Annual Review. Failure to attend such review will result in a
letter of admonition, censure or other sanction as deemed appropriate by the
Compliance Officer (or designee). Such document will be placed in the
violations file. Such file is required to be maintained under the rules of
the Investment Advisers Act of 1940.
9. Special Reports to Directors
The Compliance Officer (or designee) will prepare on a timely basis a report
to the Directors/Trustees of any investment company managed by the Adviser
explaining significant remedial action taken by the Compliance Officer (or
designee) or the Adviser in response to violations of the Code, the related
Procedures under the Code or the Friedman, Billings & Ramsey Group, Inc.
Insider Trading Compliance Procedures.
10. Annual Reports by the Compliance Officer
A. Annually, the Compliance Officer (or designee) will provide a written
report to the Fund's board, which will (a) describe any issues arising under
the Code or Procedures since the last report, including information about
material violations of the Code or Procedures and sanctions imposed in
response to the material violations, and (b) certify that the Fund and
Adviser each has adopted procedures reasonably necessary to prevent access
persons from violating the Code.
B. Also, once each year, the Compliance Officer (or designee) will report to
the Boards of Directors/Trustees of the Adviser's investment company client
accounts with regard to evolving industry practices or developments in
applicable laws or regulations during the past year, recommend changes in
the Friedman, Billings & Ramsey Group, Inc. Insider Trading Compliance
Procedures or Procedures under the Code, report any violative conduct of a
substantial nature requiring significant remedial action occurring during
the last year, and other information as requested by the directors/trustees.
<PAGE>
11. What Can Happen If You Violate the Code
Employees violating or about to violate the provisions of the Adviser's Code
or these Procedures may be subject to sanctions, which may include, among
other things, restrictions on such person's personal securities
transactions; a letter of admonition, education or formal censure; fines;
suspension, reassignment, demotion or termination of employment; or other
significant remedial action.
Employees may also be subject to disgorgement proceedings for transactions
in securities that are inconsistent with Sections 5(B)(15) and 5(B)(16) of
the Code. Any profits realized on trades within any proscribed period (see
Section 5(B)) are required to be disgorged to charitable organizations or
nonprofit entities as determined by the Compliance Officer (or designee).
12. Special Procedures For Accounts in Which Access Persons and Investment
Persons Have an Ownership Interest
Access Persons, including Investment Persons, are subject to, and must
comply with, the provisions of the Code of Ethics. However, in view of the
"Statement of Policy and Procedures for Allocation and Aggregation of Trades
of Securities" adopted by the Adviser and approved by the Fund's Board of
Trustees, the following special procedures have been developed in lieu of
the "blackout" provisions set forth in Sections 5(B)(15) -(16) of the Code
of Ethics, as well as the provisions of Sections 4(I) ("Blackout Periods"),
5(B) (Pre-Clearance), and 5(C) (Reporting) of the Procedures for
transactions by partnerships, hedge funds or similar accounts in which
Access Persons have a beneficial ownership interest, including Affiliated
Accounts. However, these procedures are not intended to abrogate the general
principle that the client's interests always come first. In no event should
any account in which an Access Person has a beneficial ownership interest be
favored over other accounts in determining quantity allocations, price
allocations or priority of order execution. If a procedure is not explicit
in any respect, that general principle will control.
Accordingly, subject to the limitations set forth below, accounts in which
Access Persons, including Investment Persons, have an interest will be
permitted to effect transactions in the same or similar securities and on
the same day as other advisory clients of the Adviser, provided that there
are no other policies or procedures that would preclude the transaction
(e.g., the Friedman, Billings & Ramsey Group, Inc. Insider Trading
Compliance Procedures). Sections 5(B)(15) - (16) of the Code of Ethics and
Sections 4(I), 5(B), and 5(C) of the Rules and Procedures Adopted Under the
Code of Ethics shall not apply to transactions by accounts in which Access
Persons have a beneficial ownership interest, provided that (i) such
transactions are effected in accordance with the "Statement of Policy and
Procedures for Allocation and Aggregation of Trades of Securities" adopted
by the Adviser and approved by the Fund's Board of Trustees, (ii) no
Investment Persons individually or in the aggregate own 5% or more of the
account, (iii) no Investment Persons and/or Access Persons, individually or
in the aggregate own 25% or more of the account, and (iv) no Investment
Persons may manage more than three such accounts (i.e., accounts in which
Investment Persons and/or Access Persons have an interest), and each such
account should differ in investment policy so that no more than 25% of the
securities in the account are in common with those in other such accounts.
<PAGE>
Exhibit A
WHAT IS "BENEFICIAL OWNERSHIP"
The purpose of this exhibit is to illustrate situations in which an employee has
or does not have direct or indirect beneficial ownership of a security. If an
employee has direct or indirect beneficial ownership of a "reportable security"
he/she is required to report transactions in the security according to the
provisions of Section 5 of the Procedures. If an employee has or acquires
beneficial ownership of a "security requiring prior approval," he/she is
required to pre-clear transactions in such security according to the provisions
of Section 5 of the Procedures. In other words, with respect to securities
beneficially owned by an employee, the employee reports transactions in
"reportable securities" and pre-clears transactions in "securities requiring
prior approval" as if the transactions were his/her own.
A. What is Beneficial Ownership?
As used in the Procedures, beneficial ownership will be interpreted in the
same manner as it would be under Rule 16a-1(a)(2) under the Securities
Exchange Act of 1934 in determining whether a person is a beneficial owner
of a security for purposes of your reporting obligations under the
Procedures. For the purposes of Rule 16a-1(a)(2), beneficial ownership
means:
. having or sharing, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise, a direct or indirect
pecuniary interest in any class of equity securities
. the term "pecuniary interest" means the opportunity, directly or
indirectly,o profit or share in any profit derived from a transaction in
the subject securities.
Using the above definition as a general guideline, the ultimate determination of
beneficial ownership will be made in light of the facts of the particular case.
Key factors are the degree of the individual's ability to exercise control over
the security and the ability of the individual to benefit from the sale of the
security. Employees are encouraged to seek the advice of the Compliance Officer
(or designee) if they have any questions concerning whether or not they have
beneficial ownership of any security, including those in any pension or
retirement plan.
B. General Rules as to Beneficial Ownership
1. Securities Held by Family Members
As a general rule, the term "indirect pecuniary interest" includes
securities held by members of a person's immediate family sharing the same
household. The term "immediate family" means any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law,
or sister-in-law, and includes adoptive relationships. Absent
countervailing facts, it is expected that securities held by relatives who
share the same home as the reporting person will be reported as
beneficially owned by such person.
<PAGE>
2. Derivative Securities
The term "indirect pecuniary interest" includes the right to acquire an
equity security through the exercise or conversion of any derivative
security. Thus, transactions in derivative securities have to be reported
even if the derivative securities are not presently exercisable. In
general, the term "derivative security" means any option, warrant,
convertible security, stock appreciation right, or similar right with an
exercise or conversion privilege at a price related to an equity security,
or similar securities with a value derived from the value of an equity
security.
3. Securities Held by a Corporation
Generally, ownership of securities in a company (i.e., corporation or
similar entity) does not constitute beneficial ownership with respect to
the holdings of the company in the securities of another issuer. However,
an owner of securities issued by a company will be deemed to have
beneficial ownership in the securities holdings of the company where the
owner is a controlling shareholder of the company and has or shares
investment control.
4. Partnerships
General partners of both limited and general partnerships have an indirect
pecuniary interest in the portfolio holdings of the partnership. A general
partner's pecuniary interest is his proportional interest in the
partnership's portfolio securities measured by the greater of (1) his share
of the partnership profits including any interest in profits that arise
from the purchase and sale of the partnership's portfolio securities, or
(2) his share of the partnership capital account. Limited partners do not
generally have an indirect pecuniary interest in portfolio holdings of the
partnership.
5. Securities Held in Trust
In general, if a trustee subject to Section 16 of the Securities Exchange
Act of 1934 has a pecuniary interest in any holding or transaction in the
issuer's securities held by the trust, such holding or transaction is
attributed to the trustee.
<PAGE>
A trustee also will be deemed to be a beneficial owner of securities in a
trust where at least one beneficiary of the trust is a member of the
trustee's immediate family, as defined above.
The rules governing the issue of under what circumstances a trust, trustee
or beneficiary have to report its, his or her transactions are complicated.
Employees are encouraged to seek the advise of the Compliance Officer (or
designee) in connection with securities held in a trust.
6. Securities Not Beneficially Owned
Beneficial ownership does not include indirect investment by any person in
portfolio securities held by:
. any holding company registered under the Public Utility Holding
Company Act;
. any investment company registered under the 1940 Act;
. interests in securities constituting part of a broad-based
publicly traded market basket or index of stocks, approved for
trading by the appropriate governmental authority.
C. Examples of Beneficial Ownership
1. Securities Held by Family Members
Example 1. X and Y are married. Although Y has an independent source of
income from a family inheritance and segregates her funds from those of
her husband, Y contributes to the maintenance of the family's home. X and
Y have engaged in joint estate planning and have the same financial
advisor. Since X and Y's resources are clearly significantly directed
toward their common property, they will be deemed to be beneficial owners
of each other's securities.
Example 1-B. X's adopted son Z lives in X's home. Z is self-supporting
and contributes to household expenses. X is presumed to have an indirect
pecuniary interest in Z's securities, and therefore is subject to the
reporting obligations described above with respect to Z's securities.
2. Securities Held by a Company
Example 2-A. O is a holding company with five shareholders. Although O
does no business on its own, it has several wholly owned subsidiaries
that manufacture oil-related products. X is a controlling shareholder of
O and shares investment control over O's portfolio. X has a beneficial
interest in the securities holdings of O.
<PAGE>
3. Securities Held in Trust
Example 3-A. X is trustee of a trust created for his minor children. When
both of X's children reach 21, each will receive an equal share of the
corpus of the trust. X is a beneficial owner of the trust.
Example 3-B. X is trustee of an irrevocable trust for his daughter. X is
a director of the issuer of the equity securities held by the trust. The
daughter is entitled to the income of the trust until she is 25 years old
and is then entitled to the corpus. If the daughter dies before reaching
25, X is entitled to the corpus. X should report and pre-clear the
securities transactions of the trust as his own.
4. Book Entry Shares in Public Companies
Certain widely held public companies provide for automatic share
accumulation programs directly from the respective companies. Initial
transactions pursuant to these programs must be pre-cleared by the
Compliance Officer (or designee), but subsequent investments do not
require pre-clearance. However, such holdings should be reported on the
Initial/Annual Asset Disclosure Form (see Exhibit C). Other types of
automatic programs that do not require pre-clearance include:
. automatic withdrawal from checking account, monthly, for
investments in book entry shares in public companies; and
. automatic reinvestment of dividends in established book entry
accounts with public companies.
5. Investment Clubs
Transactions by an Investment Club in which an employee is a participant,
partner or otherwise has a direct or indirect beneficial ownership, are
subject to the pre-clearance and reporting provisions described in the
Procedures.
<PAGE>
EXHIBIT B
The Procedures under the Code of Ethics require that certain employees obtain
the approval of the Compliance Officer (or designee) before purchasing or
selling any security requiring prior approval, and that such employees enable
the Compliance Officer (or designee) to receive duplicate confirmation for all
of their transactions in reportable securities. The table below is intended to
show the types of securities that are considered to be securities requiring
prior approval and reportable securities. This list does not purport to be an
exhaustive list of securities requiring prior approval and reportable
securities, and questions should be directed to the Compliance Officer (or
designee) when clarification is necessary.
<TABLE>
<S> <C> <C> <C>
======================================================================================================================
Securities Requiring Reportable
Types of Securities Prior Approval Securities
- ------------------------------------------------------------------------ ---------------------- ======================
Securities issued or guaranteed by the U.S. government, its agencies No No
or instrumentalities
- ------------------------------------------------------------------------ ---------------------- ======================
- ------------------------------------------------------------------------ ---------------------- ======================
Money market instruments, such as bankers' acceptances, certificates No No
of deposit or repurchase agreements
- ------------------------------------------------------------------------ ---------------------- ======================
- ------------------------------------------------------------------------ ---------------------- ======================
Securities issued by open-end investment companies (including the No No
Adviser's clients) and unit investment trusts
- ------------------------------------------------------------------------ ---------------------- ======================
- ------------------------------------------------------------------------ ---------------------- ======================
Securities and stock options issued by the Adviser, if any No Yes
- ------------------------------------------------------------------------ ---------------------- ======================
- ------------------------------------------------------------------------ ---------------------- ======================
Options on a stock market index, foreign currency, etc. No Yes
- ------------------------------------------------------------------------ ---------------------- ======================
- ------------------------------------------------------------------------ ---------------------- ======================
Unregistered or private placement securities or "limited offerings" Yes Yes
- ------------------------------------------------------------------------ ---------------------- ======================
- ------------------------------------------------------------------------ ---------------------- ======================
Securities issued by a closed-end investment company Yes Yes
- ------------------------------------------------------------------------ ---------------------- ======================
- ------------------------------------------------------------------------ ---------------------- ======================
Securities issued or guaranteed by any foreign government, its No Yes
agencies or instrumentalties
- ------------------------------------------------------------------------ ---------------------- ======================
======================================================================== ---------------------- ======================
Variable annuities issued by insurance company separate accounts No No
======================================================================== ---------------------- ======================
All securities other than those described above, including but not
limited to: Yes Yes
- -- corporate bonds, notes and debentures
- -- equity stock, including common and preferred (and options thereon)
- -- foreign securities, including ADRS, GDRS, etc.
- -- limited partnership interests
- -- municipal bonds notes and debentures
- -- rights and warrants Yes Yes
securities acquired upon the exercise of rights, warrant and
options
======================================================================== ---------------------- ======================
The following transactions are exempt from the pre-clearance and/or reporting
process, even if the security involved requires pre-clearance and/or reporting:
- - Automatic reinvestment plans for mutual funds and other securities (the initial investment is not exempt from
this process)
- - Purchases and sales that are non-volitional
Private securities transaction involving securities that require pre-clearance
and/or reporting are not exempt from this process.
======================================================================================================================
<PAGE>
EXHIBIT C: Initial/Annual Reporting Forms
Employee Report of Holdings in Securities
Initial/Annual Disclosure of Personal Securities Holdings (Asset Disclosure Form)
- ------------------------------------------------------------------------------------------------------------------------------------
(Circle Initial Or Annual)
Name:
Department:
Date:
Employee Number:
- ------------------------------------------------------------------------------------------------------------------------------------
I have direct or indirect ownership** interest in the following securities that
are held at the following broker/dealers, companies or other institutions:
- ------------------------------------------------------------------------------------------------------------------------------------
-------------------------- ----------------------- --------------------------------------------------------------------------------
Name of Security No. of Shares or Name & Address: Broker/Dealers, Companies or Other Institutions Account Number Account
Principal Amount Registration
------------------- ------------------ ----------------------------------------------------------------- ------------- ------------
------------------- ------------------ ----------------------------------------------------------------- ------------- ------------
------------------- ------------------ ----------------------------------------------------------------- ------------- ------------
------------------- ------------------ ----------------------------------------------------------------- ------------- ------------
------------------- ------------------ ----------------------------------------------------------------- ------------- ------------
------------------- ------------------ ----------------------------------------------------------------- ------------- ------------
------------------- ------------------ ----------------------------------------------------------------- ------------- ------------
------------------- ------------------ ----------------------------------------------------------------- ------------- ------------
------------------- ------------------ ----------------------------------------------------------------- ------------- ------------
------------------- ------------------ ----------------------------------------------------------------- ------------- ------------
(Use reverse side to enter additional information.)
</TABLE>
I have identified above all applicable brokerage, company and other
institutional accounts in which I have a direct or indirect beneficial ownership
interest. I understand that I must contact the Compliance Officer (or designee)
at the time an account is closed and/or new account is opened.
Signature:
**Accounts for which you have a direct or indirect beneficial ownership interest
include, for example, your own accounts as well as accounts of your spouse
and/or minor children, adults living in your home, and trusts for which you are
trustee or in which you have a beneficial ownership interest. Please call the
Compliance Officer (or designee) if you are unsure if you have a beneficial
ownership interest in a brokerage account.
- ------------------------------- ------------------------------------------------
- ------------------------------- ------------------------------------------------
- ------------------------------- ------------------------------------------------
- ------------------------------- ------------------------------------------------
- ------------------------------- ------------------------------------------------
- ------------------------------- ------------------------------------------------
- ------------------------------- ------------------------------------------------
- ------------------------------- ------------------------------------------------
<PAGE>
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Employee Report of Holdings in Securities
Initial/Annual Disclosure of Personal Securities Holdings (Asset Disclosure Form)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------ ----------------------------------------------------------------------------------------- -----------
- ------------------------------ ----------------------------------------------------------------------------------------- -----------
- ------------------------------ ----------------------------------------------------------------------------------------- -----------
- ------------------------------ ----------------------------------------------------------------------------------------- -----------
- ------------------------------ ----------------------------------------------------------------------------------------- -----------
- ------------------------------ ----------------------------------------------------------------------------------------- -----------
- ------------------------------ ----------------------------------------------------------------------------------------- -----------
- ------------------------------ ----------------------------------------------------------------------------------------- -----------
- ------------------------------ ----------------------------------------------------------------------------------------- -----------
- ------------------------------ ----------------------------------------------------------------------------------------- -----------
- ------------------------------ ----------------------------------------------------------------------------------------- -----------
- ------------------------------ ----------------------------------------------------------------------------------------- -----------
- ------------------------------ ----------------------------------------------------------------------------------------- -----------
- ------------------------------ ----------------------------------------------------------------------------------------- -----------
</TABLE>
Please check the box if you wish to disclaim beneficial ownership of
any security listed on this report.
<PAGE>
Exhibit C: Quarterly Reporting Form
MEMORANDUM FOR TRANSACTIONS IN A CALENDAR QUARTER
To: Compliance Officer (or designee)
From:
(Please print or type)
Date:
Subject: Personal Securities Transaction Report*
This Personal Securities Transaction Report ("Report") is submitted pursuant to
the Procedures under the Code of Ethics of FBR Fund Advisers, Inc., FBR
Investment Services, Inc. and The FBR Family of Funds. The table below lists
information with respect to purchases or sales in any reportable security in
which I may be deemed to have a direct or indirect beneficial ownership
interest. I understand that I may have direct or indirect beneficial ownership
of securities of which certain other persons are the record owners as well as
securities of which I am the record owner, and I have included transactions in
such securities in this Report where applicable. I also understand that I am not
required to include in this Report transactions effected for any account over
which I do not have any direct or indirect beneficial interest, influence or
control.
I hereby certify that:
1. I am fully familiar with the Code of Ethics and the related Procedures
referred to above as well as the Friedman, Billings & Ramsey Group, Inc.
Insider Trading Compliance Procedures.
2. To the best of my knowledge, the information furnished in this Report is
complete, true and correct.
Employee Signature
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------ --------- ------------ --------------- -------------- ------------- ------------- --------------
Shares or Broker,
Date of Title of Principal **Nature of Dealer or
Transaction Issuer Securities Amount*** Transaction Price/Unit Bank ****
- ------------------ --------- ------------ --------------- -------------- ------------- ------------- --------------
- ------------------ --------- ------------ --------------- -------------- ------------- ------------- --------------
- ------------------ --------- ------------ --------------- -------------- ------------- ------------- --------------
- ------------------ --------- ------------ --------------- -------------- ------------- ------------- --------------
- ------------------ --------- ------------ --------------- -------------- ------------- ------------- --------------
- ------------------ --------- ------------ --------------- -------------- ------------- ------------- --------------
- ------------------ --------- ------------ --------------- -------------- ------------- ------------- --------------
- ------------------ --------- ------------ --------------- -------------- ------------- ------------- --------------
- ------------------ --------- ------------ --------------- -------------- ------------- ------------- --------------
- ------------------ --------- ------------ --------------- -------------- ------------- ------------- --------------
- ------------------ --------- ------------ --------------- -------------- ------------- ------------- --------------
</TABLE>
* Important Note: This Report is due no later than 10 calendar days after the
end of the calendar quarter in which the transaction took place.
** Purchase, sale or any other type of disposition or acquisition.
*** Interest rate and maturity date (if applicable).
**** Check this column, if you wish to disclaim beneficial ownership of any
security listed on this Report.
<PAGE>
Exhibit D: Initial Acknowledgement Forms
(Privileged And Confidential Information)
THE FBR FAMILY OF FUNDS
CODE OF ETHICS
INITIAL ACKNOWLEDGMENT FORM
I have read the Code of Ethics of the FBR Fund Advisers, Inc., FBR
Investment Services, Inc. and The FBR Family of Funds, the related Procedures
and the Friedman, Billings & Ramsey Group, Inc. Insider Trading Compliance
Procedures, and I understand the requirements thereof. I certify that I will
comply with the above. I understand that any violation of the above may lead to
sanctions or other significant remedial action.
Print Name ___________________
Signature ____________________
Date__________________________
<PAGE>
(Privileged And Confidential Information)
THE FBR FAMILY OF FUNDS
CODE OF ETHICS
INITIAL ACKNOWLEDGMENT FORM
(Access and Investment Persons)
I have read the Code of Ethics of FBR Fund Advisers, Inc., FBR
Investment Services, Inc. and The FBR Family of Funds, the related Procedures
and the Friedman, Billings & Ramsey Group, Inc. Insider Trading Compliance
Procedures, and I understand the requirements thereof. I certify that I will
comply with the above. I understand that any violation of the above may lead to
sanctions or other significant remedial action. I understand that I may also be
subject to disgorgement proceedings for any short-term transactions that I may
conduct that are inconsistent with Sections 5(B)(15)-(16) of the Code.
As appropriate, I have disclosed to the Compliance Officer (or
designee) all personal securities holdings for which I have direct or indirect
beneficial ownership and I will continue to do so on an annual and quarterly (if
appropriate) basis as long as I am employed with any of the entities names above
or any of their affiliates, and I will continue to keep this information current
with the Compliance Officer (or designee).
I understand that there may be prohibitions, restrictions and blackout
periods on certain types of securities transactions and that I am prohibited
from acquiring any securities in an initial public offering (IPO).
Print Name ___________________
Signature ___________________
Date _________________________
<PAGE>
Exhibit E: Annual Acknowledgement Forms
(Privileged And Confidential Information)
THE FBR FAMILY OF FUNDS
CODE OF ETHICS
ANNUAL ACKNOWLEDGMENT FORM
I have read the Code of Ethics of the FBR Fund Advisers, Inc., FBR
Investment Services, Inc. and The FBR Family of Funds, the related Procedures
and the Friedman, Billings & Ramsey Group, Inc. Insider Trading Compliance
Procedures. I understand the requirements thereof, and except as otherwise
disclosed to the Compliance Officer (or designee), I certify that I have, to
date, complied with and will continue to comply with such requirements,
including, but not limited to, those requirements relating to gifts. I
understand that any violation of the above may lead to sanctions or significant
remedial action.
Print Name ______________________
Signature _______________________
Date _____________________________
<PAGE>
(Privileged And Confidential Information)
THE FBR FAMILY OF FUNDS
CODE OF ETHICS
ANNUAL ACKNOWLEDGMENT FORM
(Access and Investment Persons)
I have read the Code of Ethics of FBR Fund Advisers, Inc., FBR
Investment Services, Inc. and The FBR Family of Funds, the related Procedures
(collectively, the "Code")and the Friedman, Billings & Ramsey Group, Inc.
Insider Trading Compliance Procedures. I understand the requirements thereof,
and except as otherwise disclosed to the Compliance Officer (or designee), I
certify that I have, to date, complied with, and will continue to comply with,
such requirements. I understand that any violation of the above may lead to
sanctions or significant remedial action. I understand that I may also be
subject to disgorgement proceedings for any short-term transactions that I may
conduct that are inconsistent with Sections 5(B)(15) - (16) of the Code.
As appropriate, I have reported or disclosed all personal securities
transactions required to be reported or disclosed pursuant to the requirements
of the Code. I have reported to the Compliance Officer (or designee) all
additions and/or deletions of accounts for reportable securities for which I
have direct or indirect beneficial ownership held at broker/dealers, companies
or other institutions. I have disclosed all personal securities for which I have
direct or indirect beneficial ownership. I will continue to do so on an annual
and quarterly (if appropriate) basis as long as I am employed by the entities
named above or their affiliates.
I understand that there may be prohibitions, restrictions and blackout
periods on certain types of securities transactions and that I am prohibited
from acquiring any securities in an initial public offering (IPO).
Print Name _______________________
Signature ________________________
Date _____________________________
<PAGE>
Exhibit F
Procedures For The Pre-Clearance Of Personal Securities Transactions
1. Securities Transactions Requiring Pre-Clearance
Employees who are deemed to be access persons desiring to purchase or sell
a security requiring prior approval must request approval from the
Compliance Officer (or designee) prior to execution of such transaction.
(Note: Pre-clearance is also required for transactions in securities
requiring prior approval whenever an employee has or acquires a beneficial
ownership interest in such security.) Failure to obtain pre-clearance when
required will generally be considered a violation of these Procedures.
Employees are encouraged to seek pre-clearance for all of their
transactions in reportable securities; however, pre-clearance is required
only for transactions in securities requiring prior approval. Exhibit B
summarizes the difference between reportable securities and securities
requiting prior approval.
2. Pre-Clearance Procedures
The procedure described below shall be followed in order to ascertain
whether a proposed personal securities transaction by an employee should be
approved or disapproved. Employees should recognize that this procedure is
designed to provide legal protection to the Adviser, its clients and
employees.
A. Completion of Part I of Pre-Clearance Form
Requests for the pre-clearance of securities transactions shall be
documented by completion of the Pre-Clearance Form (see Exhibit G).
The employee seeking to purchase or sell a security requiring prior
approval shall complete Part I of the form in full and submit it to
the Compliance Officer (or designee), and shall provide all of the
information required by Part I of the form.
B. Completion of Part II of Pre-Clearance Form
The Compliance Officer (or designee) shall review the information in
Part I of the Pre-Clearance Form for completeness. If the proposed
transaction requires pre-clearance, or the employee seeks
pre-clearance even though it is not required, the Compliance Officer
(or designee) will work with the Investments Department to complete
Part II of the form.
<PAGE>
Part II of the Pre-Clearance Form is completed for the purpose of
ascertaining whether there are any potential conflicts of interest
between recent or anticipated securities transactions in client
accounts and proposed transactions by employees. However, the Adviser
believes that before an employee engages in any securities
transaction, such employee has a duty to determine that the proposed
transaction would not be in conflict with recent or proposed
securities transactions in client accounts and would otherwise be in
compliance with the Code and these Procedures.
C. Considerations During the Pre-Clearance Process
1. Anticipated Client Account Trades
For access persons, if any client account is considering the purchase
of the same or equivalent security, the Compliance Officer (or
designee) will disapprove the proposed transaction if it is a purchase
of the same or equivalent security of the same issuer. If any client
account is considering the sale of the same or equivalent security,
the Compliance Officer (or designee) will disapprove the transaction
if it is a sale of the same or equivalent security of the same issuer.
2. Parallel Transactions
For access persons, if a client account has recently purchased a
security, ordinarily there is no reason for the Compliance Officer (or
designee) to disapprove a subsequent purchase of the same or
equivalent security of the same issuer, provided all client account
transactions have taken precedence over the employee's proposed
transaction and there are no anticipated client account transactions
in the same or equivalent security of the same issuer. Likewise, if a
client account has recently sold a security, ordinarily there is no
reason for the Compliance Officer (or designee) to disapprove a
subsequent sale of the same or equivalent security, so long as there
are no anticipated client account transactions in the same or
equivalent security of the same issuer. Investment persons are subject
to the seven-day blackout period on all proposed transactions as
described in Section 2(C)(4) below.
3. Opposite Transactions
If any client account has, within the past seven calendar days, sold
the same or equivalent security of the same issuer, the Compliance
Officer (or designee) disapproves the access person's proposed
security transaction if it is a purchase. If any client account has,
within the past seven calendar days, purchased the same or equivalent
security of the same issuer, the Compliance Officer (or designee) will
disapprove the access person's transaction if it is a sale. Investment
persons are subject to the seven-day blackout period on all proposed
transactions as described in Section 2(C)(4) below.
Depending on the circumstances in each case, the Compliance Officer
(or designee) may impose a "cooling-off period" longer or shorter than
the seven-day period described above. Some of these circumstances
could include whether the security is thinly traded, the number and
dollar volume of transactions of employees and client accounts, and
the employee's involvement in the investment process. (Note: The day
of the last client account trade is counted as the first day of this
five day period.)
<PAGE>
4. Blackout Periods
A. Same Day.
Access persons are prohibited from executing a securities transaction
on any day during which a client account has a pending, "buy" or
"sell" order in that same or equivalent security until that order is
executed or withdrawn.
Exceptions. Notwithstanding anything to the contrary, an access person
may engage in transactions in the same securities or similar
securities as the Fund provided that (1) the transactions are
aggregated and (2) in the opinion of the trader and the Compliance
Officer (or designee), the transaction is not likely to adversely
affect the price at which the Funds' order will be executed.
Generally, transactions in securities with an average monthly trading
volume of $100 million or more shall be presumed to meet these
criteria. In addition, an access person may engage in transactions in
mutual fund shares and government securities without regard to the
blackout period.
B. Seven-Days
Investment persons are prohibited from buying or selling a security
within at least seven calendar days before or after a client account
trades in the same or equivalent security. (Note: The day of the last
client account trade is counted as the first day of this seven
calendar day period.)
If any client account purchases or sells a security within seven days
before or after a trade by an investment person, the Compliance
Officer (or designee) has the authority to require that the employee's
trade be unwound or canceled. The Compliance Officer (or designee)
shall require that the employee take such action as necessary to
unwind, reverse or disgorge such securities. The Compliance Officer
(or designee) shall direct the employee to relinquish any profits
obtained as a result of unwinding or canceling the trade. Any losses
or associated commissions realized on trades within the prescribed
period are the responsibility of the employee who executed the trade
during a blackout period and as a result had to unwind or cancel the
trade.
<PAGE>
C. 30-Days
Investment persons are prohibited from profiting in the purchase and
voluntary sale, or sale and voluntary purchase, of the same or
equivalent security within 30 calendar days of a trade by any client
account. If such employee purchases and sells the same or equivalent
security or other property of the same issuer during this 30-day
blackout period, the Compliance Officer (or designee) shall direct the
employee to relinquish any profits obtained from such short-term
transactions. The Compliance Officer (or designee) may adopt rules
providing for exceptions upon application on a case-by case basis.
D. Conflict of Interest Monitoring
All personal trades executed by access persons will be monitored by
the Compliance Officer (or designee) for current and future conflicts
of interest with client accounts.
5. Options
Any transaction in an option by an access person will be disapproved
by the Compliance Officer (or designee) if a client account holds, at
the time of the employee's proposed transaction, a long or short
position in either the option itself or in the underlying security to
which the option relates. If the option and the security to which the
option relates are not held by client accounts at the time of the
employee's proposed transaction, the employee's transaction in the
option may be approved, but only if there are no apparent conflicts of
interest as a result of the pre-clearance process.
As described previously, an option relating to common stock will be
treated as an "equity security" for purposes of the pre-clearance
process. If the employee has sought pre-clearance for an options
transaction, the Compliance Officer (or designee) reminds the employee
that pre-clearance is required for both the opening and closing
transaction. He/she also advises the employee that if the opening
transaction is approved, the closing transaction could be difficult to
approve due to apparent conflicts of interest or competing obligations
that arise after the time the employee's opening transaction was
approved. In cases where the pre-clearance process indicates that bona
fide, apparent conflicts of interest exist or where obligations to
client accounts appear to be in competition with the securities
transactions of employees, the first preference and priority must be
given to transactions of client accounts. Consequently, the approval
of options transactions can be delayed in order to establish that
first preference and priority has been given to client accounts.
Effectively, therefore, options transactions take on an added element
of risk -- the rapidly declining time value of options is coupled with
the need, in some cases, to delay closing transactions of individuals
to ensure that first preference and priority is given to the execution
of any pending client account transactions.
<PAGE>
Because of the foregoing, employees must recognize that closing
options transactions can be disapproved or delayed in certain cases
and that additional risks can therefore result from engaging in
options transactions.
6. Initial Public Offering ("IPOs")
Investment persons may not acquire direct or indirect beneficial
ownership or otherwise purchase securities issued during an IPO.
7. Private Placements
Investment persons are prohibited from acquiring an unregistered
security issued in a private (or limited) placement without the prior
written approval of the Compliance Officer (or designee). Under normal
circumstances, such approval will not be withheld if the employee
demonstrates in writing that: (1) the investment is not suitable for
one or more of the Adviser's clients, (2) the investment opportunity
was unique to the individual circumstances of the employee, (3) the
investment did not involve employment with the Adviser or its
affiliated broker-dealer as a consideration by the offeree, and (4) no
overreaching would or could occur. Investment persons who have been
authorized to acquire securities in a private placement must disclose
such investment to the Investment Policy Committee when such
investment person plays apart in any subsequent consideration of any
investment in the issuer by a client account and that the client's
decision to purchase securities of the issuer should be subject to an
independent review by the Committee.
8. Non-Investment Grade Corporate Bonds
If an access person wishes to purchase a corporate bond that is held
in one or more client accounts and which is currently not rated or
rated less than investment grade, the Compliance Officer (or designee)
disapproves the proposed transaction. (For further details, see
Section 4(K) of the Procedures adopted under the Code.)
D. Approval
Unless the employee's proposed transaction has been disapproved, the
Compliance Officer (or designee) will indicate his/her approval of the
transaction by signing the Pre-Clearance Form. The form is kept on
file in the Compliance Office, as required under Section 6(B) of the
Procedures.
Ordinarily, the securities transactions of employees will be
disapproved if they fail to meet the foregoing approval criteria.
However, in some circumstances it may be appropriate for a securities
transaction to be approved even though one or more of the above
criterion indicates that the transaction should be disapproved. In
such cases, the reason for justifying such a trade will be described
in the "Comments" section of the Pre-Clearance Form or on a
supplemental sheet to the form.
1. Approval Period
Execution of an approved securities transaction is permissible
through the date indicated in Part I of the Pre-Clearance Form,
provided that, ordinarily, execution shall be effected no later
than the day following the date of the request for pre-clearance.
2. Procedure for Appealing Disapproved Securities Transactions
If any employee believes that a disapproved securities
transaction should have been approved, he/she may appeal the
decision of the Compliance Officer (or designee) by presenting a
written request for approval to the President of the Adviser.
<PAGE>
Exhibit G
Pre-Clearance of Personal Securities Transaction Forms
(Note: Execution of all approved transactions should be effected no later than
the date following the date the request for prior approval was approved.)
<TABLE>
<S> <C>
PART 1: To be completed by FBR Fund Advisers, Inc. employee seeking pre-clearance.
- -------------- -------------------------------------------------------------------------------------------------------
1a. Employee Name:
- -------------- -------------------------------------------------------------------------------------------------------
- -------------- -------------------------------------------------------------------------------------------------------
1b. Employee Number:
- -------------- -------------------------------------------------------------------------------------------------------
- -------------- -------------------------------------------------------------------------------------------------------
2. Department:
- -------------- -------------------------------------------------------------------------------------------------------
- -------------- -------------------------------------------------------------------------------------------------------
3. Phone #:
- -------------- -------------------------------------------------------------------------------------------------------
- -------------- -------------------------------------------------------------------------------------------------------
4. Date of Request:
- -------------- -------------------------------------------------------------------------------------------------------
- -------------- -------------------------------------------------------------------------------------------------------
5. Name of Issuer/Security:
- -------------- -------------------------------------------------------------------------------------------------------
- -------------- -------------------------------------------------------------------------------------------------------
5a. Quantity (specify Par/Shares/Contracts):
- -------------- -------------------------------------------------------------------------------------------------------
- -------------- -------------------------------------------------------------------------------------------------------
5b. Is this a purchase or sell transaction?
- -------------- -------------------------------------------------------------------------------------------------------
- -------------- -------------------------------------------------------------------------------------------------------
5c. Security Type (common stock, option, bond etc.):
- -------------- -------------------------------------------------------------------------------------------------------
- -------------- -------------------------------------------------------------------------------------------------------
5d. CUSIP Number and TICKER Symbol:
- -------------- -------------------------------------------------------------------------------------------------------
- -------------- -------------------------------------------------------------------------------------------------------
5e. Is this security a new issue (IPO)? [IPO's ARE PROHIBITED!!!]
- -------------- -------------------------------------------------------------------------------------------------------
- -------------- -------------------------------------------------------------------------------------------------------
5f. Is this an unregistered, private placement or limited placement security?
- -------------- -------------------------------------------------------------------------------------------------------
- -------------- -------------------------------------------------------------------------------------------------------
5g. Is this security a corporate bond that is unrated/below investment grade?
- -------------- -------------------------------------------------------------------------------------------------------
- -------------- -------------------------------------------------------------------------------------------------------
6. Have you purchased or sold equivalent securities of the same issuer within the past 60 calendar days?
- -------------- -------------------------------------------------------------------------------------------------------
- -------------- -------------------------------------------------------------------------------------------------------
7. Date by which proposed transaction is to be completed:
- -------------- -------------------------------------------------------------------------------------------------------
8. Name of broker/dealer to provide duplicate confirmation to Compliance Office:
- -------------- -------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Employee Certification:
To the best of my knowledge, no FBR Fund Advisers, Inc. client account holds or
is considering the purchase or sale of the same (or equivalent) securities of
this issuer. I have read the Code of Ethics of FBR Fund Advisers, Inc., FBR
Investment Services, Inc. and The FBR Family of Funds, the related Procedures
(collectively, the "Code") and the Friedman, Billings & Ramsey Group, Inc.
Insider Trading Compliance Procedures within the past year, and I believe that
this transaction complies with the above.
Employee's Signature:
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Form for Pre-Clearance of Personal Securities Transactions
Part II: To be completed by Compliance Officer (or designee) and Trading Desk
-------------------------------------------------------------------------------------------------------------
CUSIP Number or TICKER Symbol:
-------------------------------------------------------------------------------------------------------------
Issuer/Security Name:
-------------------------------------------------------------------------------------------------------------
------------------- -----------------------------------------------------------------------------------------
1. Has any transaction involving this security been
made in any FBR Fund Advisers, Inc. client account
within the last 7 days?
------------------- -----------------------------------------------------------------------------------------
2. Are there any pending or anticipated transactions
by any FBR Fund Advisers, Inc. client account
involving this security?
------------------- -----------------------------------------------------------------------------------------
3. Do any FBR Fund Advisers, Inc. client accounts currently hold this security? If Yes,
------------------- -----------------------------------------------------------------------------------------
--------------------------------------- ---------------------------------------------------------------------
4. (a) Qty Held (b) Date and (c)
Type ("P" or "S") of last
transaction/(d) "*" if any
transaction is pending
--------------------------------------- ---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------
--------------------------------------- ---------------------------------------------------------------------
--------------------------------------- ---------------------------------------------------------------------
--------------------------------------- ---------------------------------------------------------------------
--------------------------------------- ---------------------------------------------------------------------
--------------------------------------- ---------------------------------------------------------------------
5. Reviewed By:
(Head Trader) (Date)
6. Approved By:
(Compliance Officer) (Date)
7.
-------------------------------------------------------------------------------------------------------------
Comments:
-------------------------------------------------------------------------------------------------------------
</TABLE>
AKRE CAPITAL MANAGEMENT, LLC
FORM OF
CODE OF ETHICS
Adopted Under Rule 17j-1
Akre Capital Management, LLC (the Adviser), is confident that its Officers,
Directors, and employees act with integrity and good faith. The Adviser
recognizes, however, that personal interests may conflict with the FBR Small Cap
Value Fund (the Fund) interests where Officers, Directors or employees:
. know about the Fund's present or future Fund portfolio transactions;
or
. have the power to influence Fund portfolio transactions; and
. engage in Securities transactions for their personal account(s).
In an effort to prevent any conflicts from arising and in accordance with Rule
17j-1(b)(1) under the Investment Company Act of 1940, the Adviser has adopted
this Code of Ethics (the Code) to address transactions that may create or appear
to create conflicts of interest, and to establish reporting requirements and
enforcement procedures. (Definitions of underlined terms are included in
Appendix I).
1. About this Code of Ethics
A. Who is covered by the Code of Ethics?
. All Officers;
. All Directors; and
. All employees.
B. What rules apply to me?
This Code sets forth specific prohibitions regarding
Securities transactions. All Officers, Directors and employers
of the Adviser are considered both access persons and
investment personnel, as defined in Appendix I attached
hereto. As such, all of the prohibitions and restrictions
contained in this Code are universally applicable. The Code
also sets out certain reporting requirements attached in Part
A.
<PAGE>
2. Statement of General Principles.
In recognition of the trust and confidence placed in the Adviser by the
Fund, and because the Adviser believes that its operations should
benefit the Fund's shareholders, the Adviser has adopted the following
universally applicable principles:
A. The interests of the Fund's shareholders are paramount.
Shareholder interests must be placed before personal interest.
B. All personal Securities transactions must be accomplished in a
manner that avoids conflict between your personal interests
and those of the Fund and its shareholders.
C. You must avoid actions or activities that allow (or appear to
allow) you or your family to benefit from your position with
the Adviser, or that bring into question your independence or
judgment.
3. Prohibitions and Restrictions Applicable to Akre Capital Management,
LLC Personnel.
A. Prohibition Against Fraud, Deceit and Manipulation.
You cannot, in connection with the purchase or sale, directly
or indirectly, of a security held or to be acquired by the
Fund:
1. employ any device, scheme or artifice to defraud
the Fund;
2. make to the Fund any untrue statement of a
material fact or omit to state to the Fund a
material fact necessary in order to make the
statements made, in light of the circumstances
under which they are made, not misleading;
3. engage in any act, practice or course of
business which would operate as a fraud or
deceit upon the Fund; or
4. engage in any manipulative practice with respect
to the Fund.
B. Limits on Accepting or Receiving Gifts.
You may not accept or receive any gift of more than de minimis
value from any person or entity in connection with the Fund's
entry into a contract, development of an economic
relationship, or other course of dealing by or on behalf of
the Fund.
<PAGE>
C. Same Day Blackout on Personal Securities Transactions.
You cannot purchase or sell, directly or indirectly, any
Security in which you have (or by reason of such transaction
acquire) any beneficial ownership on the same day as the same
(or a related) Security is being purchased or sold by Fund.
D. 30-Days Restriction
Employees are prohibited from buying or selling a security
within 30 calendar days of a trade in the same security by the
Fund.
E. Restrictions on Investments in IPOs and Limited Offerings.
Employees shall not acquire direct or indirect beneficial
ownership of, or otherwise purchase, securities issued during
an initial public offering or a limited offering.
4. Reporting Requirements.
Subject to Section VII hereof, all Officers, Directors and employees
must comply with the reporting requirements set forth in Part A.
5. Review and Enforcement of the Adviser's Code.
A. Appointment of a Review Officer.
A review officer (the Review Officer) will be appointed by the
President to perform the duties described in this Section V.
B. The Review Officer's Duties and Responsibilities.
1. The Review Officer shall notify each person who becomes
an access person, and is thereby required to report
under this Code, no later than 10 days prior to the
first quarter in which they are obligated to begin
reporting.
2. The Review Officer will, on a quarterly basis, compare
all reported personal Securities transactions with the
Fund's completed portfolio transactions and a list of
Securities being considered for purchase or sale by the
Adviser (if such a list exists), to determine whether a
Code violation may have occurred. Before determining
that a person has violated the Code, the Review Officer
must give the person an opportunity to supply
explanatory material.
<PAGE>
3. If the Review Officer determines that a Code violation
has or may have occurred, the Review Officer must
submit the determination, together with the
confidential quarterly report and any explanatory
material provided by the person, to the President.
The President will determine whether the person
violated the Code.
4. No person is required to participate in a determination
of whether he or she has committed a Code violation or
discuss the imposition of any sanction against himself
or herself.
5. The Review Officer will report his or her own
Securities transactions to an Alternate Review Officer
on a quarterly basis, which Alternative Review Officer
shall otherwise fulfill the duties of the Review
Officer with respect to Securities transactions so
reported.
C. Resolution; Sanction(s).
If the President finds that a person has violated the Code,
the President will approve a proposed resolution of the
situation or, if appropriate, impose upon the person sanctions
that the President deems appropriate and will report the
violation and the resolution and/or sanction imposed to the
Fund's Board of Trustees at the next regularly scheduled board
meeting unless, in the sole discretion of the President,
circumstances warrant an earlier report.
6. Annual Written Report to the Board
At least once a year, the Adviser will provide the Fund's Board of
Trustees a written report that includes:
(1) Issues Arising Under the Code. The report will describe any
issue(s) that arose during the previous year under the Code or
procedures thereto, including any material Code or procedural
violation(s), and any resulting sanction(s); and
(2) Certification and Adoption. The report will certify to the
Board that the Adviser has adopted measures reasonably
necessary to prevent its access persons from violating the
Code.
<PAGE>
7. Interrelationship With the Fund's Code of Ethics.
1. General Principle.
A person who is both an Officer and/or Trustee of the Fund and
an Officer, Director, and/or employee of the Adviser, is only
required to report under this Code of Ethics.
2. Procedures. The President of the Adviser shall:
1. Submit to the Board of Trustees of the Fund a copy of
this code of ethics;
2. Promptly furnish to the Fund, upon request, copies of
any reports made under this code of ethics by any
person who is also covered by the Fund's code;
3. Promptly report to the Fund in writing any material
amendments to this code of ethics; and
4. Immediately furnish to the Fund, without request, all
material information regarding any violation of this
code of ethics by any person.
8. Recordkeeping.
The Adviser will maintain records as set forth below. These records
will be maintained in accordance with Rule 31a-2 under the 1940 Act and
the following requirements. They will be available for examination by
representatives of the Securities and Exchange Commission.
1. A copy of this Code and any other code which is, or at
any time within the past five years has been, in effect
will be preserved in an easily accessible place.
2. A record of any Code violation and of any sanctions
taken will be preserved in an easily accessible place
for a period of not less than five years following the
end of the fiscal year in which the violation occurred.
3. A copy of each report made by an access person under
this Code will be preserved for a period of not less
than five years from the end of the fiscal year in
which it is made, the first two years in an easily
accessible place.
<PAGE>
4. A record of all persons who are, or within the past
five years have been, required to submit reports under
this Code, or who are or were responsible for reviewing
these reports, will be maintained in an easily
accessible place. 1.
5. A copy of each annual written report to the Board,
required by Section VI of this Code, must be maintained
for at least five years from the end of the fiscal year
in which it is made, the first two years in an easily
accessible place.
9. Miscellaneous.
1. Confidentiality. All personal Securities transactions
reports and any other information filed under this Code
will be treated as confidential, provided that such
reports and related information may be produced to the
Securities and Exchange Commission and other regulatory
agencies.
2. Interpretation of Provisions. The President may from
time to time adopt such interpretations of this Code as
he deems appropriate.
3. Compliance Certification. Every year, you must certify
that you have read, understood, and complied with this
Code and the reporting requirements of this Code of
Ethics. An Annual Compliance Certification is attached
as Appendix V.
Adopted this ________ day of ______________, 2000.
<PAGE>
PART A
Officers, Directors, and Employees
1. List of Securities Holdings
A. Initial Holdings Report.
You must submit a listing of all Securities beneficially owned
within 10 days of the date you first become associated with
the [Adviser]. An Initial Holdings Report Form is attached as
Appendix III.
You must provide the Review Officer with a complete listing of
all Securities you beneficially own as of January 30, 2000 .
The report must contain the following information:
1. Title, number of shares and principal amount of each
Security;
2. The name of any broker, dealer or bank with whom you
maintain an account in which Securities are held; and
3. The date your report is submitted.
B. Annual Holdings Report.
Each year, you must submit a report to the Review Officer
disclosing the Securities you beneficially own as of December
31st of that year. The report must contain the same type of
information as in your Initial Holdings Report. An Annual
Holdings Report Form is attached as Appendix IV.
2. Required Transaction Reports.
A. Quarterly Transaction Reports and Accounts Established:
i. On a quarterly basis, you must report transactions in
Securities, as well as any Securities accounts
established. You must submit your report to the
Review Officer no later than 10 days after the end of
the calendar quarter in which the transaction to
which the report relates was effected. A Quarterly
Personal Securities Transactions Report Form is
included as Appendix II.
<PAGE>
ii. If you had no reportable transactions or did not open
any Securities accounts during the quarter, you are
still required to submit a report. Please note on
your report that you had no reportable transactions
during the quarter, and return it, signed and dated.
iii. Remember: You are not required to report your
transactions under the Fund's Code if you are
required to file reports under this Code.
3. What Securities Transactions and Accounts are Covered Under Your
Quarterly Reporting Obligation?
You must report all transactions in Securities that because of the
transaction, you acquire direct or indirect beneficial ownership. The
report must also include any account you established in which
Securities were held during the quarter.
4. What Securities Transactions May Be Excluded from Your Report?
You are not required to detail or list the following Securities or
transactions on your report:
A. Purchases or sales effected for any account over which you have
no direct or indirect influence or control.
B. Purchases you made solely with the dividend proceeds received in
a dividend reinvestment plan or that are part of an automatic
payroll deduction plan, where you purchase Securities issued by
your employer.
C. Purchases arising from the exercise of rights issued by an issuer
pro rata to all holders of a class of its Securities, as long as
you acquired these rights from the issuer, and sales of such
rights so acquired.
D. Purchases or sales which are non-volitional on the part of the
person, including purchases or sales upon exercise of puts or
calls written by the person and sales from a margin account to a
bona fide margin call.
You may include a statement in your report that the report
shall not be construed as your admission that you have any
direct or indirect beneficial ownership in the Security
included in the report.
<PAGE>
APPENDIX I
Definitions
Access person includes any director or officer of a fund or of a fund's
investment adviser, and any employee of the fund or its investment adviser who,
in connection with his or her regular functions or duties, participates in the
selection of a fund's portfolio Securities or who has access to information
regarding a fund's purchases or sales of Securities.
Beneficial ownership means the same as it does under Section 16 of the
Securities Exchange Act of 1934 and Rule 16a-1(a)(2) thereunder. You should
generally consider yourself the beneficial owner of any Securities in which you
have a direct or indirect pecuniary interest. In addition, you should consider
yourself the beneficial owner of Securities held by your spouse, your minor
children, a relative who shares your home, or other persons by reason of any
contract, arrangement, understanding or relationship that provides you with sole
or shared voting or investment power.
Control means the same as it does under in Section 2(a)(9) of the 1940 Act.
Section 2(a)(9) provides that "control" means the power to exercise a
controlling influence over the management or policies of a company, unless such
power is solely the result of an official position with such company. Ownership
of 25% or more of a company's outstanding voting Securities is presumed to give
the holder of such Securities control over the company. This presumption may be
countered by the facts and circumstances of a given situation.
Initial public offering (IPO) means an offering of Securities registered under
the Securities Act of 1933, the issuer of which, immediately before
registration, was not subject to the reporting requirements of section 13 or
section 15(d) of the Securities Exchange Act of 1934.
Investment personnel means any employee of the Fund or the Adviser who, in
connection with his or her regular duties, makes or participates in making
recommendations regarding the purchase or sale of Securities by the Fund. As of
[date], the Adviser's investment personnel include:
[List of qualifying employees]
Limited offering means an offering that is exempt from registration under the
Securities Act of 1933 pursuant to section 4(2) or section 4(6) in the
Securities Act of 1933.
Purchase or sale of a Security includes, among other things, the writing of an
option to purchase or sell a Security.
<PAGE>
Security means the same as it does under Section 2(a)(36) of the 1940 Act,
except that it does not include direct obligations of the U.S. Government or its
agencies, bankers' acceptances, bank certificates of deposit, commercial paper,
high quality short-term debt instruments, including repurchase agreements, and
shares issued by open-end funds.
A Security held or to be acquired by the Fund means any Security that within the
most recent 15 days, (i) is or has been held by the Fund, or (ii) is being or
has been considered by the Fund's adviser or sub-adviser for purchase by the
Fund, any option to purchase or sell, and any Security convertible into or
exchangeable for any Security.
A Security is being purchased or sold by the Fund from the time a purchase or
sale program has been communicated to the person who places buy and sell orders
for the Fund until the program has been fully completed or terminated.
A Security is being considered for purchase or sale by a Fund when a Security is
identified as such by the Adviser to the Fund.
<PAGE>
APPENDIX II
AKRE CAPITAL MANAGEMENT, LLC
Quarterly Personal Securities Transactions Report
Name of Reporting Person: _____________________
Calendar Quarter Ended: ________________________
<TABLE>
<S> <C> <C> <C> <C> <C>
- ------------ --------------- ------------ -------------------- -------------- -------- -----------------------------
Name of Name of Broker, Dealer or
Issuer Date of Title of No. of Shares/ Type of Bank Effecting Transaction
Transaction Security Principal Amount Transaction Price
- ------------ --------------- ------------ -------------------- -------------- -------- -----------------------------
- ------------ --------------- ------------ -------------------- -------------- -------- -----------------------------
- ------------ --------------- ------------ -------------------- -------------- -------- -----------------------------
- ------------ --------------- ------------ -------------------- -------------- -------- -----------------------------
- ------------ --------------- ------------ -------------------- -------------- -------- -----------------------------
- ------------ --------------- ------------ -------------------- -------------- -------- -----------------------------
- ------------ --------------- ------------ -------------------- -------------- -------- -----------------------------
- ------------ --------------- ------------ -------------------- -------------- -------- -----------------------------
- ------------ --------------- ------------ -------------------- -------------- -------- -----------------------------
- ------------ --------------- ------------ -------------------- -------------- -------- -----------------------------
- ------------ --------------- ------------ -------------------- -------------- -------- -----------------------------
- ------------ --------------- ------------ -------------------- -------------- -------- -----------------------------
- ------------ --------------- ------------ -------------------- -------------- -------- -----------------------------
If you had no reportable transactions during the quarter, please check here. ___
If you established an account within the last quarter, please provide the
following information:
- --------------------------------------------------------------------------------------------------------------------
Name of Broker, Dealer Date Account was Interest Rate Maturity Date Date Report Submitted
or Bank Established (if applicable) (if applicable) by Access Person
- --------------------------------------------------------------------------------------------------------------------
If you did not establish a Securities account within the last quarter, please check here. ___
If you to disclaim beneficial ownership of one or more Securities reported
above, please describe below and indicate which Securities are at issue.
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
___________________ _____________________
Signature Date
<PAGE>
APPENDIX III
AKRE CAPITAL MANAGEMENT, LLC
Initial Holdings Report
Name of Reporting Person: ____________________
Effective Date of Access Person Status: _____________
Date Report Submitted: _____________________________
- ---------------------------------------- ------------------------------------- -------------------------------------
Title of Security No. Of Shares Principal Amount
- ---------------------------------------- ------------------------------------- -------------------------------------
- ---------------------------------------- ------------------------------------- -------------------------------------
- ---------------------------------------- ------------------------------------- -------------------------------------
- ---------------------------------------- ------------------------------------- -------------------------------------
- ---------------------------------------- ------------------------------------- -------------------------------------
- ---------------------------------------- ------------------------------------- -------------------------------------
- ---------------------------------------- ------------------------------------- -------------------------------------
- ---------------------------------------- ------------------------------------- -------------------------------------
- ---------------------------------------- ------------------------------------- -------------------------------------
If you had no reportable transactions during the quarter, please check here. ___
If you established an account within the last quarter, please provide the
following information:
- ---------------------------------------------------------------------------------------------
Name of Broker, Dealer Date Account was Interest Rate Maturity Date
or Bank Established (if applicable) (if applicable)
- ---------------------------------------------------------------------------------------------
If you did not establish a Securities account within the last quarter, please check here. ___
If you to disclaim beneficial ownership of one or more Securities reported
above, please describe below and indicate which Securities are at issue.
________________ ______________________
Signature Date
<PAGE>
APPENDIX IV
AKRE CAPITAL MANAGEMENT, LLC
Annual Holdings Report
Name of Reporting Person: __________________
Date Report Submitted: _____________________
Calendar Year Ended: _______________________
Note: All information in this Report must be current as of a date no more than
30 days prior to its submission.
Title of Security No. Of Shares Principal Amount
- ---------------------------------------- ------------------------------------- -------------------------------------
- ---------------------------------------- ------------------------------------- -------------------------------------
- ---------------------------------------- ------------------------------------- -------------------------------------
- ---------------------------------------- ------------------------------------- -------------------------------------
- ---------------------------------------- ------------------------------------- -------------------------------------
- ---------------------------------------- ------------------------------------- -------------------------------------
- ---------------------------------------- ------------------------------------- -------------------------------------
- ---------------------------------------- ------------------------------------- -------------------------------------
- ---------------------------------------- ------------------------------------- -------------------------------------
If you had no reportable transactions during the quarter, please check here. ___
If you established an account within the last quarter, please provide the
following information:
- ---------------------------------------------------------------------------------------------
Name of Broker, Dealer Date Account was Interest Rate Maturity Date
or Bank Established (if applicable) (if applicable)
- ---------------------------------------------------------------------------------------------
If you did not establish a Securities account within the last quarter, please check here. ___
</TABLE>
If you to disclaim beneficial ownership of one or more Securities reported
above, please describe below and indicate which Securities are at issue.
_______________ __________________
Signature Date
<PAGE>
Appendix V
ANNUAL COMPLIANCE CERTIFICATION
I have recently read and reviewed the Fund's Code of Ethics. I understand such
policies and procedures and recognize that I am subject to them, and understand
the penalties for non-compliance. I certify that I am in full compliance with
the Fund's Code of Ethics. I further certify that I have fully and accurately
completed this Certificate. If there are any exceptions, they are fully
disclosed below.
EXCEPTIONS (described fully):
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
__________________
Signature:
Name: ___________________
(please print)
Date: _______________________
Please return this form to the Review Officer not later than.
<PAGE>
Appendix VI
INVESTMENT ADVISER CERTIFICATION
Akre Capital Management, LLC, investment adviser to the FBR Small Cap Value
Fund, hereby certifies to the Fund's Board of Trustees, that it has adopted
procedures reasonably necessary to prevent its Access Persons from violating its
Code of Ethics.
_______________________________________ _______________
President, Akre Capital Management, LLC Date
