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Exhibit 23(p)(2)
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BATTERYMARCH
FINANCIAL
MANAGEMENT, INC.
CODE OF ETHICS
Dated: June 1, 2000
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TABLE OF CONTENTS
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I. Introduction 1
A. Individuals Covered by the Code 1
B. Fiduciary Duty 1
1. Clients Come First 1
2. Avoid Taking Advantage 1
3. Comply with the Code 1
II. Personal Securities Transactions 1
A. Preclearance Requirements for Access Persons 1
1. General Requirement 1
2. Trade Authorization Request Forms 2
3. Review of Form 2
4. Length of Trade Authorization Approval 2
5. No Explanation Required for Refusals 3
B. Execution of Personal Securities Transactions 3
C. Prohibited Transactions 3
1. Always Prohibited Securities Transactions 3
a. Inside Information 3
b. Market Manipulation 3
c. Legg Mason, Inc. Stock During Restricted Period 3
d. Others 3
2. Generally Prohibited Securities Transactions 3
a. Initial Public Offerings (Investment Personnel only) 4
b. One Day Blackout (all Access Persons) 4
c. Seven-Day Blackout (Portfolio Managers only) 4
d. 60-Day Blackout (Investment Personnel only) 4
e. Private Placements (Investment Personnel only) 5
f. Intention to Buy or Sell for a Legg Mason Fund
or Client Account (all Access Persons) 5
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D. Exemptions 5
1. Exemptions from Preclearance and Treatment as a
Prohibited Transaction 5
a. Mutual Funds 6
b. No Knowledge 6
c. Legg Mason, Inc. Stock (Outside of Restricted Period) 6
d. Certain Corporate Actions 6
e. Systematic Investment Plans 6
f. Option-Related Activity 6
g. Commodities, Futures, and Options on Futures 6
h. Rights 7
i. Fixed Income Investments 7
j. Miscellaneous 7
2. Exemption from Treatment as a Prohibited Transaction 7
a. De Minimis Transactions 7
b. Options on Broad-Based Indices 7
E. Reporting Requirements 7
1. Initial and Periodic Disclosure of Personal Holdings
by Access Persons 7
2. Transaction and Periodic Statement Reporting Requirements 8
3. Availability of Reports 8
III. Fiduciary Duties 9
A. Confidentiality 9
B. Gifts 9
1. Accepting Gifts 9
2. Solicitation of Gifts 9
3. Giving Gifts 9
C. Corporate Opportunities 9
D. Undue Influence 10
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E. Service as a Director 10
IV. Compliance with the Code of Ethics 10
A. Code of Ethics Review Committee 10
1. Membership, Voting and Quorum 10
2. Investigating Violations of the Code 10
3. Annual Reports 10
B. Remedies 11
1. Sanctions 11
2. Review 11
C. Exceptions to the Code 12
D. Inquiries Regarding the Code 12
V. Definitions 12
"Access Person" 12
"Batterymarch" 12
"Batterymarch's Compliance Department" 12
"Beneficial Interest" 13
"Client Account" 13
"Code" 13
"Equivalent Security" 13
"Fixed Income Investment" 14
"Immediate Family" 14
"Investment Personnel" and "Investment Person" 14
"Legg Mason Fund" and "Fund" 14
"Legg Mason's Legal and Compliance Department" 14
"Portfolio Manager" 14
"Preclearance Officer" 14
"Restricted Period" 14
"Securities Transaction" 15
"Security" 15
VI. Appendices to the Code 15
Appendix 1 - Contact Persons i
Appendix 2 - Acknowledgement of Receipt of Code of Ethics
and Personal Holdings Report ii
Appendix 3 - Trade Authorization Request for Access Persons iv
Appendix 4 - Certification of Access Person's Designee v
Appendix 5 - Form Letter to Broker, Dealer or Bank vi
Appendix 6 - Certification of No Beneficial Interest vii
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I. INTRODUCTION
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A. Individuals Covered by the Code. Unless the use of another Code of
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Ethics has been approved in writing by Legg Mason's Legal and Compliance
Department, all Access Persons/1/ are subject to the provisions of this Code.
B. Fiduciary Duty. The Code is based on the principle that Access Persons
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owe a fiduciary duty to the Client Accounts and must avoid activities, interests
and relationships that might interfere with making decisions in the best
interests of any of the Client Accounts.
As fiduciaries, Access Persons must at all times comply with the following
principles:
1. Client Accounts Come First. Access Persons must scrupulously
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avoid serving their personal interests ahead of the interests of
the Client Accounts. An Access Person may not induce or cause a
Client Account to take action, or not to take action, for the
Access Person's personal benefit, rather than for the benefit of
the Client Account. For example, an Access Person would violate
this Code by causing a Client Account to purchase a Security the
Access Person owned for the purpose of increasing the price of
that Security.
2. Avoid Taking Advantage. Access Persons may not use their
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knowledge of open, executed, or pending portfolio transactions to
profit by the market effect of such transactions. Receipt of
investment opportunities, perquisites, or gifts from persons
seeking business with Batterymarch or a Client Account could call
into question the exercise of an Access Person's independent
judgment.
3. Comply With the Code. Doubtful situations should be resolved in
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favor of the Client Accounts. Technical compliance with the
Code's procedures will not automatically insulate from scrutiny
any Securities Transactions that indicate an abuse of fiduciary
duties.
II. PERSONAL SECURITIES TRANSACTIONS
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A. Preclearance Requirements for Access Persons.
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1. General Requirement. Except for the transactions specified in
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Section II.D.1., any Securities Transaction in which an Access
Person has or acquires a Beneficial Interest must be precleared
with a Preclearance Officer.
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/1/ Capitalized words are defined in Section V (Definitions).
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2. Trade Authorization Request Forms. Prior to entering an order
---------------------------------
for a Securities Transaction that requires preclearance, the
Access Person must complete a Trade Authorization Request form
(Appendix 3) and submit the completed form to a Preclearance
Officer. The form requires Access Persons to provide certain
information and to make certain representations.
In the event an Access Person is unable to complete a Trade
Authorization Request form, the Access Person may designate
another individual to complete the form on his or her behalf.
The Access Person's designee should complete the Trade
Authorization Request form and the Certification of Access
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Person's Designee (Appendix 4) and submit both forms to a
Preclearance Officer.
Proposed Securities Transactions of a Preclearance Officer that
require preclearance must be submitted to another Preclearance
Officer.
3. Review of Form. After receiving a completed Trade Authorization
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Request form, a Preclearance Officer will (a) review the
information set forth in the form, (b) review information
regarding past, pending, and contemplated transactions by any
relevant Client Account, as necessary, and (c) as soon as
reasonably practicable, determine whether to authorize the
proposed Securities Transaction. The granting of authorization,
and the date and time that authorization was granted, must be
reflected on the form. The Preclearance Officer should keep one
copy of the completed form for Batterymarch's Compliance
Department and provide one copy to the Access Person seeking
authorization.
No order for a securities transaction for which preclearance
authorization is required may be placed prior to the receipt of
written authorization of the transaction by a Preclearance
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Officer. Verbal approvals are not permitted.
4. Length of Trade Authorization Approval. The authorization
--------------------------------------
provided by a Preclearance Officer is effective until the earlier
of (1) its revocation, (2) the close of business on the trading
day after the authorization is granted (for example, if
authorization is provided on a Monday, it is effective until the
close of business on Tuesday), or (3) the moment the Access
Person learns that the information in the Trade Authorization
Request form is not accurate. If the order for the Securities
Transaction is not placed within that period, a new authorization
must be obtained before the Securities Transaction is placed. If
the Securities Transaction
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is placed but has not been executed before the authorization
expires (as, for example, in the case of a limit order), no new
authorization is necessary unless the person placing the original
order for the Securities Transaction amends it in any way, or
learns that the information in the Trade Authorization Request
form is not accurate.
5. No Explanation Required for Refusals. In some cases, a
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Preclearance Officer may refuse to authorize a Securities
Transaction for a reason that is confidential. Preclearance
Officers are not required to give an explanation for refusing to
authorize any Securities Transaction.
B. Execution of Personal Securities Transactions. Transactions in
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Securities subject to the preclearance requirements may be executed through any
broker, dealer, or bank so long as the requirements of Section II.E.2.
(Transaction and Periodic Statement Reporting Requirements) are met. If a
precleared trade is not executed, the Access Person should notify the
Preclearance Officer.
C. Prohibited Transactions.
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1. Always Prohibited Securities Transactions. The following
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Securities Transactions are prohibited and will not be authorized
under any circumstances:
a. Inside Information. Any transaction in a Security by an
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individual who possesses material nonpublic information
regarding the Security or the issuer of the Security;
b. Market Manipulation. Transactions intended to raise, lower,
-------------------
or maintain the price of any Security or to create a false
appearance of active trading;
c. Legg Mason, Inc. Stock During Restricted Period. Any
-----------------------------------------------
purchase or sale of Legg Mason, Inc. stock effected by an
Access Person during the Restricted Period, excluding the
exercise of options under any of Legg Mason, Inc.'s employee
stock plans. In addition, Batterymarch employees may not
engage in short sales of Legg Mason, Inc. stock (except
short sales against the box) or in purchases or sales of
listed or OTC options or derivatives relating to Legg Mason,
other than opening and closing hedging transactions, such as
covered call options and protective put options; and
d. Others. Any other transaction deemed by the Preclearance
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Officer to involve a conflict of interest, possible
diversions of corporate opportunity, or an appearance of
impropriety.
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2. Generally Prohibited Securities Transactions. Unless exempted by
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Section II.D., the following Securities Transactions are
prohibited and will not be authorized by a Preclearance Officer
absent exceptional circumstances. The prohibitions apply only to
the categories of Access Persons specified.
a. Initial Public Offerings (Investment Personnel only). Any
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purchase of a Security by Investment Personnel in an initial
public offering (other than a new offering of a registered
open-end investment company);
b. One Day Blackout (all Access Persons). Any purchase or sale
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of a Security by an Access Person on any day during which
any Client Account has a pending buy or sell order, or has
effected a buy or sell transaction, in the same Security (or
Equivalent Security);
c. Seven-Day Blackout (Portfolio Managers only). Any purchase
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or sale of a Security by a Portfolio Manager within seven
calendar days of a purchase or sale of the same Security (or
Equivalent Security) by a Client Account managed by that
Portfolio Manager. For example, if a Client Account trades a
Security on day one, day eight is the first day the
Portfolio Manager may trade that Security for an account in
which he or she has a Beneficial Interest. Of course,
Portfolio Managers must place the interests of the Client
Accounts first; they may not avoid or delay purchasing or
selling a security for a Client Account in order to profit
personally. It is acknowledged that circumstances may change
with the passage of time and that at the time of a personal
trade by a Portfolio Manager, the Portfolio Manager may have
had no intention to purchase or sell the same Security for a
Client Account. Furthermore, it is recognized that at the
time of a personal trade by a Portfolio Manager, the
Portfolio Manager may have had no knowledge that the
Security would be subsequently purchased or sold for a
Client Account. This is more likely to occur at Batterymarch
where the investment process is quantitative and portfolio
construction is automated. As a result, it will not
automatically be construed to be a violation of the Code
should a Portfolio Manager trade in a Security for a Client
Account less than seven calendar days after the Portfolio
Manager traded the same Security for an account in which he
or she has a Beneficial Interest. However, under such
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circumstances, the Portfolio Manager must document in a
written memorandum addressed to Batterymarch's Compliance
Department why the personal trade by the Portfolio Manager
should not be considered a violation of the Code;
d. 60-Day Blackout (Investment Personnel only). (1) Purchase
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of a Security in which an Investment Person thereby acquires
a Beneficial Interest within 60 calendar days of a sale of
the Security (or an Equivalent Security) in which such
Investment Person had a Beneficial Interest, and (2) sale of
a Security in which an Investment Person has a Beneficial
Interest within 60 calendar days of a purchase of the
Security (or an Equivalent Security) in which such
Investment Person had a Beneficial Interest, if, in either
case, a Client Account held the Security (or an Equivalent
Security) at any time on or between the dates of the
Securities Transactions by the Investment Person; unless the
Investment Person agrees to give up all profits on the
transaction to a charitable organization specified in
accordance with Section IV.B.I.;
e. Private Placements (Investment Personnel only). Acquisition
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of a Beneficial Interest in Securities in a private
placement by Investment Personnel is strongly discouraged. A
Preclearance Officer will give permission only after
considering, among other facts, whether the investment
opportunity should be reserved for a Client Account and
whether the opportunity is being offered to the person by
virtue of the person's position as an Investment Person.
Investment Personnel who have acquired a Beneficial Interest
in Securities in a private placement are required to
disclose their Beneficial Interest to Batterymarch's
Compliance Department. If the Investment Person is
subsequently involved in a decision to buy or sell a
Security (or an Equivalent Security) from the same issuer
for a Client Account, then the decision to purchase or sell
the Security (or an Equivalent Security) must be
independently authorized by a Portfolio Manager with no
personal interest in the issuer; and
f. Intention to Buy or Sell for a Legg Mason Fund or Client
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Account (all Access Persons). Any purchase or sale of a
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Security by an Access Person at a time when that Access
Person intends, or knows of another's intention, to purchase
or sell that Security (or an Equivalent Security) on behalf
of a Legg Mason Fund, Client Account, or any client account
managed by an affiliate of Batterymarch.
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The prohibitions set forth in Section II.C.2.b. and c. apply
whether the Securities Transaction is in the same direction
(e.g., two purchases) or the opposite direction (e.g., a purchase
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and sale) as the transaction of the Client Account.
D. Exemptions.
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1. Exemptions from Preclearance and Treatment as a Prohibited
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Transaction. The following Securities Transactions are exempt
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from the preclearance requirements set forth in Section II.A. and
the prohibited transaction restrictions set forth in Section
II.C.2.:
a. Mutual Funds. Any purchase or sale of a Security issued by
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any registered open-end investment companies (including but
not limited to the Legg Mason Funds);
b. No Knowledge. Securities Transactions where the Access
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Person has no knowledge of the transaction before it is
completed (for example, Securities Transactions effected for
an Access Person by a trustee of a blind trust, or
discretionary trades involving an investment partnership or
investment club, in connection with which the Access Person
is neither consulted nor advised of the trade before it is
executed);
c. Legg Mason, Inc. Stock (Outside of Restricted Period). Any
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purchase or sale of Legg Mason, Inc. stock outside of the
Restricted Period and any exercise of options under any of
Legg Mason, Inc.'s employee stock plans;
d. Certain Corporate Actions. Any acquisition of Securities
-------------------------
through stock dividends, dividend reinvestments, stock
splits, reverse stock splits, mergers, consolidations, spin-
offs, or other similar corporate reorganizations or
distributions generally applicable to all holders of the
same class of Securities;
e. Systematic Investment Plans. Any acquisition of a security
---------------------------
pursuant to a systematic investment plan that has previously
been approved pursuant to the Code. A systematic investment
plan is one pursuant to which a prescribed investment will
be made automatically on a regular, predetermined basis
without affirmative action by the Access Person.
f. Options-Related Activity. Any acquisition or disposition of
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a security in connection with an option-related Securities
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Transaction that has been previously approved pursuant to
the Code. For example, if an Access Person receives
approval to write a covered call, and the call is later
exercised, the provisions of Sections II.A. and II.C. are
not applicable to the sale of the underlying security.
g. Commodities, Futures, and Options on Futures. Any
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Securities Transaction involving commodities, futures
(including currency futures and futures on securities
comprising part of a broad-based, publicly traded market
based index of stocks) and options on futures.
h. Rights. Any acquisition of Securities through the exercise
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of rights issued by an issuer pro rata to all holders of a
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class of its Securities, to the extent the rights were
acquired in the issue;
i. Fixed Income Investments. Any purchase or sale of Fixed
------------------------
Income Investments; and
j. Miscellaneous. Any transaction in the following: (1)
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bankers acceptances, (2) bank certificates of deposit, (3)
commercial paper, (4) repurchase agreements, (5) Securities
that are direct obligations of the U.S. Government, and (6)
other Securities as may from time to time be designated in
writing by the Code of Ethics Review Committee on the ground
that the risk of abuse is minimal or non-existent.
The Securities Transactions listed in Section II.D.1.a., i., and
j. are also exempt from the reporting requirements set forth in
Section II.E.1. and 2.
2. Exemption from Treatment as a Prohibited Transaction. The
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following Securities Transactions are exempt from the prohibited
transaction restrictions that are set forth in Section II.C.2.
They are not exempt from the preclearance requirements set forth
in Section II.A.:
a. De Minimis Transactions. The prohibitions in Section
-----------------------
II.C.2.b. and c. are not applicable to any Security
Transaction, or series of related transactions, effected
over a thirty (30) calendar day period, involving 1,000
shares or less in the aggregate if the issuer of the
Security is listed on the New York Stock Exchange or has a
market capitalization in excess of $1 billion and the volume
of trading in the Security during the prior trading day
exceeded 20,000 shares.
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b. Options on Broad-Based Indices. The prohibitions in Section
------------------------------
II.C.2.b., c., and d. are not applicable to any Securities
Transaction involving options on certain broad-based indices
designated by Batterymarch's Compliance Department. The
broad-based indices designated by Batterymarch's Compliance
Department may be changed from time to time and presently
consist of the S&P 500, the S&P 100, NASDAQ 100, Nikkei 300,
NYSE Composite, and Wilshire Small Cap indices.
E. Reporting Requirements
----------------------
1. Initial and Periodic Disclosure of Personal Holdings by Access
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Persons. Within ten (10) days of being designated as an Access
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Person and thereafter on an annual basis, an Access Person must
acknowledge receipt and review of the Code and disclose all
Securities in which such Access Person has a Beneficial Interest
on the Acknowledgement of Receipt of Code of Ethics and Personal
Holdings Report (Appendix 2). The Acknowledgement of Receipt of
Code of Ethics and Personal Holdings Report must be received by
April 30 of each year and disclose all Securities in which such
Access Person has a Beneficial Interest as of March 31. An
account statement for each account maintained with a broker,
dealer, or bank in which an Access Person has a Beneficial
Interest must be attached to the Acknowledgement of Receipt of
Code of Ethics and Personal Holdings Report.
2. Transaction and Periodic Statement Reporting Requirements. An
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Access Person must arrange for Batterymarch's Compliance
Department to receive directly from any broker, dealer, or bank
that effects any Securities Transaction, duplicate copies of each
confirmation for each such Securities Transaction as well as a
periodic statement for each account in which a Securities
Transaction occurred. Duplicate copies of confirmations and
periodic statements must be received by Batterymarch's Compliance
Department no later than ten (10) days after the end of the
applicable calendar quarter. Attached as Appendix 5 is a form of
letter that may be used to request such documents from such
entities.
If an Access Person opens an account at a broker, dealer, or bank
that has not previously been disclosed, the Access Person must
immediately notify Batterymarch's Compliance Department in
writing of the existence of the account and make arrangements to
comply with the requirements set forth herein.
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If an Access Person is not able to arrange for duplicate
confirmations and periodic statements to be sent, the Access
Person must immediately notify Batterymarch's Compliance
Department.
3. Availability of Reports. All information supplied pursuant to
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this Code may be made available for inspection to Batterymarch's
Board of Directors, the Board of Directors of each Legg Mason
Fund, the Chairman of the Board and the Vice Chairman of Legg
Mason, Inc., the Code of Ethics Review Committee, Legg Mason's
Legal and Compliance Department, Batterymarch's Compliance
Department, Preclearance Officers, the Access Person's department
manager (or designee), any party to which any investigation is
referred by any of the foregoing, the Securities Exchange
Commission, any self-regulatory organization of which Legg Mason
Wood Walker, Incorporated is a member, any state securities
commission, and any attorney or agent of the foregoing or of the
Legg Mason Funds.
III. FIDUCIARY DUTIES
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A. Confidentiality. Access Persons are prohibited from revealing
---------------
information relating to the investment intentions, activities or portfolios of
the Client Accounts, except to persons whose responsibilities require knowledge
of the information.
B. Gifts. The following provisions on gifts apply to all Batterymarch
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employees.
1. Accepting Gifts. On occasion, because of their position with
---------------
Batterymarch, employees may be offered, or may receive without
notice, gifts from clients, brokers, vendors, or other persons
not affiliated with Batterymarch. Acceptance of extraordinary or
extravagant gifts is not permissible. Any such gifts must be
declined or returned in order to protect the reputation and
integrity of Batterymarch and the Client Accounts. Gifts of a
nominal value (i.e., gifts whose reasonable value is no more than
----
$100 a year), and customary business meals, entertainment (e.g.,
----
sporting events), and promotional items (e.g., pens, mugs, T-
----
shirts) may be accepted.
If a Batterymarch employee receives any gift that might be
prohibited under this Code, the employee must immediately inform
Batterymarch's Compliance Department.
2. Solicitation of Gifts. Batterymarch employees may not solicit
---------------------
gifts or gratuities.
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3. Giving Gifts. Without written authorization from Batterymarch's
------------
Compliance Department, Batterymarch employees may not personally
give gifts with an aggregate value in excess of $100 per year to
persons associated with securities or financial organizations,
including exchanges, other member organizations, commodity firms,
news media, clients or prospects of the firm. Furthermore,
Batterymarch employees may not give gifts to clients or prospects
in excess of any limits set by such organizations (for example,
-----------
certain clients may not allow their employees to accept gifts or
may have a different threshold limit for accepting gifts (e.g.,
----
their employees may not accept gifts with an aggregate value in
excess of $50 per year)).
C. Corporate Opportunities. Access Persons may not take personal
-----------------------
advantage of any opportunity properly belonging to Batterymarch or any Client
Account. For example, an Investment Person should not acquire a Beneficial
Interest in a Security of limited availability without first offering the
opportunity to purchase such Security to Batterymarch for the relevant Client
Account.
D. Undue Influence. Access Persons may not cause or attempt to cause any
---------------
Client Account to purchase, sell or hold any Security in a manner calculated to
create any personal benefit to the Access Person. If an Access Person stands to
benefit materially from an investment decision for a Client Account, and the
Access Person is making or participating in the investment decision, then the
Access Person must disclose the potential benefit to those persons with
authority to make investment decisions for the Client Account (or, if the Access
Person in question is a person with authority to make investment decisions for
the Client Account, to Batterymarch's Compliance Department). The person to
whom the Access Person reports the interest, in consultation with Batterymarch's
Compliance Department, must determine whether or not the Access Person will be
restricted in making or participating in the investment decision.
E. Service as a Director. No Investment Person may serve on the board of
---------------------
directors of a publicly-held company (other than Batterymarch, its affiliates,
the Funds or other commingled funds which Batterymarch or its affiliates sponsor
or promote) absent prior written authorization by the Code of Ethics Review
Committee. This authorization will rarely, if ever, be granted and, if granted,
will normally require that the affected Investment Person be isolated, through a
Chinese Wall or other procedures, from those making investment decisions related
to the issuer on whose board the Investment Person sits.
IV. COMPLIANCE WITH THE CODE OF ETHICS
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A. Code of Ethics Review Committee
-------------------------------
1. Membership, Voting and Quorum. The Code of Ethics Review
-----------------------------
Committee is comprised of the individuals identified in Appendix
1.
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The Committee shall vote by majority vote with two members
serving as a quorum. Vacancies may be filled and, in the case of
extended absences or periods of unavailability, alternates may be
selected, by a majority vote of the remaining members of the
Committee; provided, however, that at least one member of the
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Committee shall also be a member of Legg Mason's Legal and
Compliance Department.
2. Investigating Violations of the Code. Batterymarch's Compliance
------------------------------------
Department is responsible for investigating any suspected
violation of the Code and shall report the results of any
investigation relating to the Legg Mason Funds to the Code of
Ethics Review Committee. The Code of Ethics Review Committee is
responsible for reviewing the results of any investigation of any
reported or suspected violation of the Code relating to the Legg
Mason Funds. Any violation of the Code relating to the Legg
Mason Funds by an Access Person will also be reported to the
Boards of Directors of the relevant Legg Mason Funds no less
frequently than each quarterly meeting.
3. Annual Reports. The Code of Ethics Review Committee will review
--------------
the Code at least once a year, in light of legal and business
developments and experience in implementing the Code, and will
report to the Board of Directors of each Legg Mason Fund:
a. Summarizing existing procedures concerning personal
investing and any changes in the procedures made during the
past year;
b. Identifying any violation requiring significant remedial
action during the past year; and
c. Identifying any recommended changes in existing restrictions
or procedures based on its experience under the Code,
evolving industry practices, or developments in applicable
laws or regulations.
B. Remedies
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1. Sanctions. If Batterymarch's Compliance Department or the Code
---------
of Ethics Review Committee determines that an Access Person has
committed a violation of the Code, Batterymarch's Compliance
Department and the Code of Ethics Review Committee may impose
sanctions and take other actions as they deem appropriate,
including a letter of caution or warning, suspension of personal
trading rights, suspension of employment (with or without
compensation), fine, civil referral to the Securities and
Exchange Commission, criminal referral,
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and termination of the employment of the violator for cause.
Batterymarch's Compliance Department and the Code of Ethics
Review Committee may also require the Access Person to reverse
the transaction in question and forfeit any profit or absorb any
loss associated or derived as a result. The amount of profit
shall be calculated by Batterymarch's Compliance Department or
the Code of Ethics Review Committee and shall be forwarded to a
charitable organization selected by either Batterymarch's
Compliance Department or the Code of Ethics Review Committee.
Failure to promptly abide by a directive from Batterymarch's
Compliance Department or the Code of Ethics Review Committee to
reverse a trade or forfeit profits may result in the imposition
of additional sanctions. No member of Batterymarch's Compliance
Department or the Code of Ethics Review Committee may review his
or her own transaction.
2. Review. Whenever the Code of Ethics Review Committee determines
------
that an Access Person has committed a violation of this Code
relating to the Legg Mason Funds that merits remedial action, it
will report no less frequently than quarterly to the Boards of
Directors of the applicable Legg Mason Funds, information
relating to the investigation of the violation, including any
sanctions imposed. The Boards of Directors of the relevant Legg
Mason Funds may modify such sanctions as they deem appropriate.
Such Boards shall have access to all information considered by
the Code of Ethics Review Committee in relation to the case. The
Code of Ethics Review Committee may determine whether or not to
delay the imposition of any sanctions pending review by the
applicable Board of Directors.
C. Exceptions to the Code. Although exceptions to the Code will rarely,
----------------------
if ever, be granted, Batterymarch's Compliance Department may grant exceptions
to the requirements of the Code on a case by case basis if it finds that the
proposed conduct involves negligible opportunity for abuse. All such exceptions
relating to the Legg Mason Funds must be in writing and must be reported as soon
as practicable to the Code of Ethics Review Committee and to any relevant Funds'
Board of Directors at their next regularly scheduled meeting after the exception
is granted.
D. Inquiries Regarding the Code. Batterymarch's Compliance Department
----------------------------
will answer any questions about this Code or any other compliance-related
matters.
V. DEFINITIONS
------------
When used in the Code, the following terms have the meanings set forth
below:
"Access Person" means:
-------------
(1) every director or officer of Batterymarch;
12
<PAGE>
(2) every employee of Batterymarch (or employee of a company in a control
relationship with any of the foregoing), who in connection with his or
her regular functions, makes, participates in, or obtains information
regarding the purchase or sale of a Security by a Client Account;
(3) every natural person in a control relationship with Batterymarch or a
Client Account who obtains information concerning recommendations made
to a Client Account with regard to the purchase or sale of a Security,
prior to its dissemination or prior to the execution of all resulting
trades; and
(4) such other persons as Batterymarch's Compliance Department or Legg
Mason's Legal and Compliance Department shall designate.
Any uncertainty as to whether an individual is an Access Person should be
brought to the attention of Batterymarch's Compliance Department. Such
questions will be resolved in accordance with, and this definition shall be
subject to, the definition of "Access Person" found in Rule 17j-1(e) (1)
promulgated under the Investment Company Act of 1940, as amended.
"Batterymarch" means Batterymarch Financial Management, Inc.
------------
"Batterymarch's Compliance Department" means the compliance department of
------------------------------------
Batterymarch and the persons designated in Appendix 1, as such Appendix shall be
amended from time to time.
"Beneficial Interest" means the opportunity, directly or indirectly,
-------------------
through any contract, arrangement, understanding, relationship or otherwise, to
profit, or share in any profit derived from, a transaction in the subject
Securities.
An Access Person is deemed to have a Beneficial Interest in the following:
(1) any Security owned individually by the Access Person;
(2) any Security owned jointly by the Access Person with others (for
example, joint accounts, spousal accounts, UTMA accounts,
partnerships, trusts and controlling interests in corporations);
and
(3) any Security in which a member of the Access Person's Immediate
Family has a Beneficial Interest if:
a. the Security is held in an account over which the Access
Person has decision making authority (for example, the
Access Person acts as trustee, executor, or guardian); or
13
<PAGE>
b. the Security is held in an account for which the Access
Person acts as a broker or investment adviser
representative.
In addition, an Access Person is presumed to have a Beneficial Interest in
any Security in which a member of the Access Person's Immediate Family has a
Beneficial Interest if the Immediate Family member resides in the same household
as the Access Person. This presumption may be rebutted if the Access Person is
able to provide Batterymarch's Compliance Department with satisfactory
assurances that the Access Person has no material Beneficial Interest in the
Security and exercises no control over investment decisions made regarding the
Security. Access Persons may use the form attached as Appendix 6 (Certification
of No Beneficial Interest) in connection with such requests.
Any uncertainty as to whether an Access Person has a Beneficial Interest in
a Security should be brought to the attention of Batterymarch's Compliance
Department. Such questions will be resolved in accordance with, and this
definition shall be subject to, the definition of "beneficial owner" found in
Rules 16a-1(a) (2) and (5) promulgated under the Securities Exchange Act of
1934, as amended.
"Client Account" means any separate or commingled account for which
--------------
Batterymarch serves as an investment manager, adviser or sub-adviser.
"Code" means this Code of Ethics, as amended.
----
"Equivalent Security" means any Security issued by the same entity as the
-------------------
issuer of a subject Security, including options, rights, stock appreciation
rights, warrants, preferred stock, restricted stock, phantom stock, and other
obligations of that company or security otherwise convertible into that
security. Options on securities are included even if, technically, they are
issued by the Options Clearing Corporation or a similar entity.
"Fixed Income Investment" means any security that pays a fixed rate of
-----------------------
return and is not traded by Batterymarch on behalf of the Client Accounts (e.g.,
----
government, corporate and municipal bonds). Convertible securities are not
considered Fixed Income Investments.
"Immediate Family" of an Access Person means any of the following persons:
----------------
child grandparent son-in-law
stepchild spouse daughter-in-law
grandchild sibling brother-in-law
parent mother-in-law sister-in-law
stepparent father-in-law
14
<PAGE>
Immediate Family includes adoptive relationships and other relationships
(whether or not recognized by law) that Batterymarch's Compliance Department
determines could lead to the possible conflicts of interest, diversions of
corporate opportunity, or appearances of impropriety which this Code is intended
to prevent.
"Investment Personnel" and "Investment Person" mean each Portfolio Manager
-------------------- -----------------
and any Access Person who, in connection with his or her regular functions or
duties, provides information and advice to a Portfolio Manager or who helps
execute a Portfolio Manager's decisions.
"Legg Mason Fund" and "Fund" mean an investment company registered under
--------------- ----
the Investment Company Act of 1940 (or a portfolio or series thereof, as the
case may be) that is sponsored by Legg Mason, Inc. or its affiliates, including,
but not limited to, the funds for which Batterymarch serves as an investment
manager, adviser or sub-adviser.
"Legg Mason's Legal and Compliance Department" means the Legal and
--------------------------------------------
Compliance Department of Legg Mason Wood Walker, Incorporated and the persons
designated in Appendix 1.
"Portfolio Manager" means a person who has or shares principal day-to-day
-----------------
responsibility for managing the portfolio of a Client Account.
"Preclearance Officer" means the person designated as a Preclearance
--------------------
Officer in Appendix 1 hereof or such person's designee.
"Restricted Period" means the period beginning five trading days before the
-----------------
expected release of Legg Mason, Inc.'s quarterly earnings and continuing for two
trading days following the quarterly earnings release.
"Securities Transaction" means a purchase or sale of Securities in which an
----------------------
Access Person has or acquires a Beneficial Interest.
"Security" includes stock, limited partnership interests, obligations
--------
otherwise convertible into stock, and all derivative instruments of the
foregoing, such as options and warrants. "Security" does not include futures or
options on futures, but the purchase and sale of such instruments are
nevertheless subject to the reporting requirements of the Code.
VI. APPENDICES TO THE CODE
----------------------
The following appendices are attached to and are a part of the Code:
Appendix 1. Contact Persons;
---------------
Appendix 2. Acknowledgement of Receipt of Code of Ethics and Personal
---------------------------------------------------------
Holdings Report;
---------------
15
<PAGE>
Appendix 3. Trade Authorization Request for Access Persons;
----------------------------------------------
Appendix 4. Certification of Access Person's Designee;
-----------------------------------------
Appendix 5. Form Letter to Broker, Dealer, or Bank;
--------------------------------------
Appendix 6. Certification of No Beneficial Interest.
----------------------------------------
16
<PAGE>
Appendix 1
CONTACT PERSONS
PRECLEARANCE OFFICERS
Philip E. Channen
DESIGNEES OF PRECLEARANCE OFFICERS
Marybeth Forbes
Denise A. Larson
LEGG MASON'S LEGAL AND COMPLIANCE DEPARTMENT
Andrew J. Bowden
Neil P. O'Callaghan
Frank R. Walker Jr.
BATTERYMARCH'S COMPLIANCE DEPARTMENT
Francis X. Tracy
Philip E. Channen
Denise A. Larson
CODE OF ETHICS REVIEW COMMITTEE
Andrew J. Bowden
Edward A. Taber, III
Neil P. O'Callaghan
Philip E. Sachs
Jennifer W. Murphy
i
<PAGE>
Appendix 2
ACKNOWLEDGEMENT OF RECEIPT OF CODE OF ETHICS AND
PERSONAL HOLDINGS REPORT
I acknowledge that I have received the Code of Ethics dated June 1, 2000 and
represent that:
1. I have read the Code of Ethics and I understand that it applies to me and to
all Securities in which I have or acquire any Beneficial Interest. I have
read the definition of "Beneficial Interest" and understand that I may be
deemed to have a Beneficial Interest in Securities owned by members of my
Immediate Family and that Securities Transactions effected by members of my
Immediate Family may therefore be subject to this Code.
2. In accordance with Section II.A. of the Code, I will obtain prior written
authorization for all Securities Transactions in which I have or acquire a
Beneficial Interest, except for transactions exempt from preclearance under
Section II.D.1. of the Code.
3. In accordance with Section II.E.2. of the Code, I will report all non-exempt
Securities Transactions in which I have or acquire a Beneficial Interest.
4. I agree to disgorge and forfeit any profits on prohibited transactions in
accordance with the requirements of the Code.
5. I will comply with the Code of Ethics in all other respects.
6. In accordance with Section II.E.1. of the Code, the following is a list of
all Securities in which I have a Beneficial Interest:
A. Provide the information requested below for each account that you maintain
with a broker, dealer, or bank. Indicate "None" if appropriate.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
NAME OF BROKER,
DEALER, OR BANK ACCOUNT TITLE ACCOUNT NUMBER
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
(Attach a separate sheet if necessary)
B. Attach the most recent account statement for each account identified
above.
ii
<PAGE>
C. If you own Beneficial Interests in Securities that are not listed on an
---
attached account statement, list them below. Include private equity
investments. Indicate "None" if appropriate.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
NAME OF
BROKER, NUMBER OF
DEALER, OR ACCOUNT ACCOUNT SHARES/PRINCIPAL
BANK TITLE NUMBER NAME OF SECURITY AMOUNT
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(Attach separate sheet if necessary)
7. (Investment Personnel Only) In accordance with Section III.E. of the Code,
the following is a list of publicly-held companies (other than Legg Mason,
Inc., its affiliates, and the Funds) on which I serve as a member of the
board of directors. Indicate "NA" or "None" if appropriate.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
NAME OF COMPANY BOARD MEMBER SINCE
---------------------------------------------------------------------------------------------------------------------
<S> <C>
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
</TABLE>
8. I certify that the information on this form is accurate and complete.
----------------------------------
Access Person's Name
---------------------------------- --------------------------------
Access Person's Signature Date
iii
<PAGE>
Appendix 3
TRADE AUTHORIZATION REQUEST FOR ACCESS PERSONS
<TABLE>
<S> <C>
1. Name of Access Person:
-------------------------------------------------
2. Account Title and Number:
-------------------------------------------------
3. Name of Security:
-------------------------------------------------
4. Maximum number of shares or units to be purchased or sold:
-------------------------------------------------
5. Name and phone number of broker to effect transaction:
-------------------------------------------------
6. Check applicable boxes: Purchase [ ] Sale [ ] Market Order [ ] Limit Order [ ] Limit Price:
-----
</TABLE>
7. In connection with the foregoing transaction, I hereby make the following
representations and warranties:
(a) I do not possess any material nonpublic information regarding the
Security or the issuer of the Security.
(b) I am not aware that any Legg Mason Fund, Client Account or any client
account managed by an affiliate of Batterymarch has an open order to
buy or sell the Security or an Equivalent Security.
(c) By entering this order, I am not using knowledge of any open,
executed, or pending transaction by a Legg Mason Fund, Client Account
or any client account managed by an affiliate of Batterymarch to
profit by the market effect of such transaction.
(d) (Investment Personnel Only.) The Security is not being acquired in an
initial public offering.
(e) (Investment Personnel Only.) The Security is not being acquired in a
private placement or, if it is, I have reviewed Section II.C.2. of the
Code and have attached hereto a written explanation of such
transaction.
(f) (Investment Personnel Only.) If I am purchasing the Security, I have
not directly or indirectly (through any member of my Immediate Family,
any account in which I have a Beneficial Interest or otherwise) sold
the Security or an Equivalent Security in the prior 60 calendar days
if the same or an Equivalent Security has been held by a Client
Account at any time on or between the dates of the Securities
Transactions by me.
(g) (Investment Personnel Only.) If I am selling the Security, I have not
directly or indirectly (through any member of my Immediate Family, any
account in which I have a Beneficial Interest or otherwise) purchased
the Security or an Equivalent Security in the prior 60 calendar days
if the same or an Equivalent Security has been held by a Client
Account at any time on or between the dates of the Securities
Transactions by me.
(h) I understand that if this trade is authorized, the length of the trade
authorization approval will not extend beyond the close of business on
the trading day after the authorization is granted (as stated in
Section II.A.4. of the Code). If the order is not placed within that
period, a new authorization must be obtained before the order is
placed.
(i) Once this order is executed, I understand that I must satisfy the
transaction and periodic statement reporting requirements as stated in
Section II.E.2. of the Code. If this order is not executed, I agree to
notify the Preclearance Officer.
(j) I believe that the proposed trade fully complies with the requirements
of the Code.
----------------------------------- ----------------------- ---------------
Access Person's Signature Date Time
iv
<PAGE>
Appendix 4
CERTIFICATION OF ACCESS PERSON'S DESIGNEE
The undersigned hereby certifies that the Access Person named on the attached
Trade Authorization Request for Access Persons (a) directly instructed me to
complete the attached form on his or her behalf, (b) to the best of my
knowledge, was out of the office at the time of such instruction and has not
returned, and (c) confirmed to me that the representations and warranties
contained in the attached Form are accurate.
________________________________
Access Person's Designee
________________________________
Print Name
________________________________
Date
v
<PAGE>
Appendix 5
FORM OF LETTER TO BROKER, DEALER, OR BANK
(Date)
(Name
and Address)
Subject: Account #
-----------------------------------
Dear :
--------------------------------
My employer, Batterymarch Financial Management, Inc., is an investment
adviser to, or principal underwriter of, an investment company. Pursuant to my
employer's Code of Ethics and Rule 17j-1 under the Investment Company Act of
1940, please send duplicate confirmations of individual transactions as well as
duplicate periodic statements for the referenced account directly to:
Philip E. Channen
Director, Compliance
Batterymarch Financial Management, Inc.
200 Clarendon Street, 49th Floor
Boston, Massachusetts 02116
Thank you for your cooperation. If you have any questions, please contact
me or Philip E. Channen at (617) 266-8300.
Sincerely,
(Name of Access Person)
vi
<PAGE>
Appendix 6
CERTIFICATION OF NO BENEFICIAL INTEREST
I have read the Code of Ethics and I understand that it applies to me and to all
Securities in which I have or acquire any Beneficial Interest. I have read the
definition of "Beneficial Interest" and understand that I may be deemed to have
a Beneficial Interest in Securities owned by members of my Immediate Family and
that Securities Transactions effected by members of my Immediate Family may
therefore be subject to this Code.
The following accounts are maintained by one or more members of my Immediate
Family who reside in my household:
Relationship of
Immediate Family
Name Member Brokerage Firm Account Number
---- ---------------- -------------- --------------
I certify that with respect to each of the accounts listed above (initial
appropriate boxes):
[ ] I do not own individually or jointly with others any of the
securities held in the account.
[ ] I do not possess or exercise decision making authority over the
account.
[ ] I do not act as a broker or investment adviser representative for
the account.
I agree that I will notify Batterymarch's Compliance Department immediately if
any of the information I have provided in this certification becomes inaccurate
or incomplete.
------------------------------------------
Access Person's Signature
------------------------------------------
Print Name
------------------------------------------
Date
vii
