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CODE OF ETHICS
FOR DIRECTORS, OFFICERS, EMPLOYEES and CERTAIN AGENTS
of
THE ALLIED OWNERS ACTION FUND INC.
and
PRIVATEER ASSET MANAGEMENT INC.
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Table of Contents
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I. INTRODUCTION........................................................................5
Statutory Background...............................................................5
Fiduciary Duty/Coverage............................................................6
General Fiduciary Rules............................................................7
II. PERSONAL SECURITIES TRANSACTIONS ...................................................7
Annual Disclosure Requirements ....................................................7
Preclearance Requirements (Applicable Only to Access Persons)......................7
Preclearance Requests by Access Persons ...........................................9
Prohibited Transactions (Applicable to Covered Persons)............................9
Lapse of Trade Authorization Approval .............................................10
Trade Reporting Requirements (Applicable to Covered Persons).......................10
III. FURTHER RESTRICTIONS .............................................................11
Confidentiality .............................................................11
Gifts..............................................................................11
No Payments to Fund Shareholders...................................................12
No Abuse of Corporate Opportunities ...............................................12
Disclosure of Conflicts............................................................12
Service as a Director Requires Consent.............................................12
Notice re Involvement in Criminal Matters or
Investment-Related Civil Proceedings...........................................13
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IV. COMPLIANCE WITH THIS CODE OF ETHICS ...............................................13
Code of Ethics Annual Review Committee ............................................13
Remedies ..........................................................................13
Compliance Certification ..........................................................14
Inquiries Regarding the Code ......................................................14
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Appendices
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Appendix 1 (Form 1, Personal Holdings in Securities)...................................15
Appendix 2 (Form 2, Pre-clearance Request for Access Persons) .........................17
Appendix 3 (Form 3, Quarterly Code of Ethics Questionnaire) ...........................18
Appendix 4 (Acknowledgment of Receipt of Code of Ethics)...............................21
Appendix 5 (Certain Definitions) ......................................................22
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I. INTRODUCTION
Statutory Background
The Investment Advisers Act of 1940, as amended (the "1940 Act"), makes
it unlawful for (a) any affiliated person of The Allied Owners Action Fund
Inc. (the "Fund") or (b) its investment adviser Privateer Asset Management Inc.
("Privateer"), in connection with the purchase or sale, directly or indirectly,
by such person of the same security held or to be acquired by the Fund,
(1) to employ any device, scheme or artifice to defraud the Fund;
(2) to make 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) to engage in any act, practice or course of business that operates
or would operate as a fraud of deceit upon the Fund; or
(4) to engage in any manipulative practice with respect to the Fund.
The Fund is required to (a) adopt a written Code of Ethics containing
provisions reasonably necessary to prevent its Access Persons (defined in
Appendix 5) from engaging in any act, practice or course of business prohibited
by items nos. 1-4 and (b) use reasonable diligence, and institute procedures
reasonably necessary, to prevent violations of this code.
Under the 1940 Act every access person of the Fund or Privateer must
report to the Fund or Privateer the information described below with respect to
transactions in any security in which such access person has, or by reason of
such transaction acquires, a Beneficial Interest in the security. Since, as
described below, Non-Access Persons can become, even temporarily, Access
Persons, the Fund and Privateer have extended certain parts of this Code to all
Persons (called "Covered Persons," defined below) affiliated with the Fund or
Privateer.
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Fiduciary Duty/Coverage
This Code of Ethics is based upon the principle that directors,
officers, employees and affiliates of the Fund and its investment adviser
Privateer have a strict fiduciary duty to place the interests of clients ahead
of their own on every occasion. This Code applies to all Access and Non-Access
Persons (collectively, "Covered Persons") and focuses principally on
pre-clearance and reporting of personal transactions in securities. Access
Persons must avoid activities, interests and relationships that might
interfere, or give the impression of interfering, with making decisions in the
best interests of the Fund and its shareholders.
As defined in Appendix 5, each officer and director of Privateer or the
Fund is automatically, by virtue of his or her position, an Access Person. Also
classified as Access Persons are Privateer and Fund employees or agents who
participate or obtain information regarding Fund transactions or who are
involved in Fund purchase or sale recommendations or, even if not so
participating or involved, obtain advance word of such information. While
Non-Access Persons comprise the balance of employees or agents of Privateer or
the Fund who do not meet the foregoing definition, Non-Access Persons must
appreciate that their status is subject to change virtually moment-to-moment if
their participation or involvement in or information available to them
regarding Fund portfolio transactions changes, even temporarily. Furthermore,
whether or not their status changes, Non-Access Persons are bound by the Code's
disclosure, prohibited transaction, reporting and gift rules.
All Covered Persons must read this Code and understand their
obligations hereunder, and ask questions of the Portfolio Manager if not clear,
even though (as a Covered Person who is a Non-Access Person) a Covered Person is
a not bound by the pre-clearance rules herein.
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General Fiduciary Rules
As fiduciaries, Access Persons must at all times:
(1) Place Fund interests first. Access Persons must scrupulously avoid
serving their own personal interests ahead of the interests of the Fund and its
shareholders.
(2) Avoid taking inappropriate advantage of position. The receipt of
investment opportunities, perquisites or gifts from persons seeking business
with the Fund or Privateer could call into question the exercise of a Access
Person's independent judgment.
(3) Conduct all personal securities transactions in full compliance
with this Code including the pre-clearance (applicable only to Access Persons)
and reporting requirements (applicable to Covered Persons).
(4) Resolve doubtful situations in favor of Fund and its shareholders.
Technical compliance with this Code's procedures will not automatically insulate
from scrutiny trades that indicate an abuse of fiduciary duty or lapse of good
judgment.
II. PERSONAL SECURITIES TRANSACTIONS
Annual Disclosure Requirements Covered Persons must disclose monthly on Form 1
(Appendix 1) all securities in which they have a Beneficial Interest and all
securities in non-Fund accounts for which they make investment decisions.
Pre-clearance Requirements (Applicable Only to Access Persons)
(1) Securities Transactions. Except for the exempt transactions set
forth below, all securities transactions in which an Access Person or a member
of his or her Immediate Family (as defined in Appendix 5) has a Beneficial
Interest must be pre-cleared by the Portfolio Manager.
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(2) Exempt Transactions. The following securities transactions are
exempt from the above pre-clearance requirements applicable to Access Persons:
(a) Mutual Funds. Securities issued by any registered,
open-end investment company including the Fund;
(b) No Knowledge. Securities transactions where neither the
Access Person nor an Immediate Family member knows 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 of which the Access Person is neither consulted
nor advised before it is executed);
(c) 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;
(d) Rights. Any acquisition of securities through the exercise
of rights issued by an issuer pro rata to all holders of a class of its
securities; and
(e) Miscellaneous. Any transaction in the following: (1)
bankers acceptances, (2) Certificates of Deposit, (3) commercial paper, (4)
repurchase agreements, (5) U.S. government securities, (6) equity securities
held in dividend reinvestment plans, (7) securities of the employer of a member
of the Access Person's Immediate Family if a member in a profit sharing plan
has a Beneficial Interest therein, 401(k) plan, ESOP or other similar plan and
(8) other securities if any from time to time designated in writing by
Portfolio Manager.
Note that these exempt transactions are not exempt from the monthly
reporting requirements on Form 1.
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Pre-clearance Requests by Access Persons
(1) Trade Authorization Request Forms. If the securities transaction
requires pre-clearance, the Access Person must complete, in writing, a
Pre-clearance Request on Form 2 (Appendix 2) and submit the completed form to
the Portfolio Manager.
(2) Review of Form. The Portfolio Manager will (a) review the
information set forth in Form 2 and (b) as soon as reasonably practicable
determine whether to clear the proposed transaction. The Portfolio Manager will
reflect this determination and return Form 2 to the Access Person who is not
free to trade until clearance is received.
Prohibited Transactions (Applicable to Covered Persons)
The following securities transactions are prohibited to Covered Persons
and will not be authorized by the Portfolio Manager:
(1) Use of Inside Information. Transactions in a security while in
possession of material nonpublic information relating to the issuer;
(2) Market Manipulation. Transactions intended to raise, lower or
maintain the price of any security or to create a false appearance of active
trading;
(3) Parallel Orders. Transactions in a security where there are known
to be outstanding orders to purchase or sell for the Fund or the Portfolio
Manager is known to be considering purchasing or selling for the Fund;
(3) Large Positions in Another Fund. Transactions in a registered
investment company (other than the Fund) that result in the Access Person owning
five percent or more of any class of securities in such investment company; and
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(4) Conflict of Interest; Appearance of Impropriety; After-Acquired
Conflict. Transactions deemed by the Portfolio Manager to involve a conflict of
interest or absent exceptional circumstances an appearance of impropriety. If a
Covered Person acquires a Beneficial Interest in a security later purchased by
the Fund, absent, special circumstances justifying a transaction, generally the
Covered Person will be required to either (a) place the security in a blind
trust or discretionary account in which the Covered Person is neither consulted
nor advised before a trade is executed or (b) refrain from selling such security
until after the Fund's position in the security has been sold.
Lapse of Trade Authorization Approval
The authorization provided by the Portfolio Manager is effective until
the earlier of (a) its revocation, (b) close of business on the second trading
day after authorization is granted (unless the order is placed but not executed,
in which case so long as not amended) and (c) the Access Person learns that the
information in Form 2 is not accurate or materially incomplete. If the approved
transaction is not completed before approval lapses, a new Form 2 must be
submitted.
Trade Reporting Requirements (Applicable to Covered Persons)
(1) Reporting Requirement. Every Covered Person and Immediate Family
member must by the 10th day of each month arrange for the Portfolio Manager to
receive from the Covered Person or directly, from the broker, dealer or bank
that arranges any securities transaction, a duplicate copy of the periodic
statement reflecting such transaction for each brokerage account in which the
Covered Person has a Beneficial Interest. Such periodic statement if furnished
directly by the Covered Person may be redacted to prevent disclosure of account
values. The foregoing does not apply to holdings of exempt securities. In any
event the Portfolio Manager will treat submitted Forms as confidential, to be
shared solely with such persons if any including counsel necessary or
appropriate for decision-making.
(2) Disclaimers. Any report of a securities transaction for the benefit
of a person other than the individual in whose account the transaction is placed
may contain a statement that the report should not be construed as an admission
that the reporting person has any Beneficial Interest in the security.
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(3) Record Retention. Privateer will maintain for at least six years
records of the procedures it follows in connection with the pre-clearance and
reporting requirements of this Code and, for each securities transaction, the
information relied on by the Portfolio Manager in authorizing a transaction.
III. FURTHER RESTRICTIONS
Confidentiality
Covered Persons are prohibited from revealing non-public information
relating to the investment intentions, activities or portfolios of the Fund
except to persons whose responsibilities require such knowledge.
Gifts
The following provisions on gifts apply to Covered Persons.
(1) Rules for Acceptance. Covered Persons may be offered, or may
receive without notice, gifts from clients, brokers, vendors, or other persons
dealing with the Fund or Privateer. Acceptance of extraordinary or extravagant
gifts is not permissible, and such gifts must be declined or returned. Gifts of
a nominal value, that is, gifts whose reasonable value is no more than $100 a
year, and business meals or entertainment including sporting events, may be
accepted without regard to such ceiling provided they are customary and
reasonable. The Covered Person must inform the Portfolio Manager annually on
Form 3 of gifts accepted and declined.
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(2) NASD Rules. The Rules of Fair Practice of the National Association
of Securities Dealers, Inc. ("NASD") is incorporated by reference as part of
this Code.
(3) No Solicitation of Gifts. Covered Persons may not solicit gifts or
gratuities.
(4) Giving Gifts. Covered Persons may not give any gift with a value in
excess of $100 per year to persons associated with securities or financial
organizations, news media or clients of Privateer or the Fund, except customary
business meals, entertainment and promotional items.
No Payments to Fund Shareholders
Covered Persons may not make any payments to Fund shareholders or
prospective shareholders in order to resolve any type of complaint. All such
matters must be handled by the officers of the Fund.
No Abuse of Corporate Opportunities
Covered Persons may not take personal advantage of any opportunity
properly belonging to the Fund, e.g. acquiring securities for one's own account
that would otherwise be acquired for the Fund.
Disclosure of Conflicts
If a Covered Person or Immediate Family member stands to materially
benefit from an investment decision for the Fund, this must be fully disclosed
to the Portfolio Manager.
Service as a Director Requires Consent
No Access Person other than an independent Fund director may serve on
the board of directors of a publicly-held company not affiliated with Privateer
or the Fund without prior written approval of the Portfolio Manager. This
authorization, if granted, will normally be on the
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condition that the Access Person not participate in investment decisions related
to such company's securities.
Notice re Involvement in Criminal Matters or Investment-Related Civil
Proceedings
Each Covered Person must immediately notify the Portfolio Manager if he
or she is arrested, arraigned or indicted or pleads no contest to any criminal
offense (other than minor traffic violations), or if named as a defendant in any
investment-related civil proceeding, or is a respondent in any administrative or
disciplinary action.
IV. COMPLIANCE WITH THIS CODE OF ETHICS
Code of Ethics Annual Review Committee
A committee appointed by the Portfolio Manager or counsel will review
this Code at least once a year in light of legal and business developments and
experience in implementation and will recommend necessary changes herein based
upon such review.
Remedies
(1) Sanctions. If the Portfolio Manager determines that a Access Person
has committed a violation of this Code, he or she may impose sanctions and take
other actions as 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 SEC, criminal referral and
termination of the employment for cause. The Portfolio Manager may also require
the Access Person to reverse the trade in question and forfeit to a charitable
organization any profit or personally absorb any loss derived therefrom. No
Access Person may review his or her own transaction. Any appeal from the
Portfolio Manager's decision suspending or terminating employment may be made to
the compensation committee of the Fund's board.
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(2) Review. The Portfolio Manager or counsel will report annually to
the boards of Privateer and the Fund on Code implementation and report thereto
periodically regarding violations of this Code and sanctions imposed.
Compliance Certification
At least quarterly all Covered Persons are required to certify on Form
3, the Annual Code of Ethics Questionnaire, set forth in Appendix 3, that they
have complied with the Code in all respects or, if the case, in what respects
they have not.
Inquiries Regarding the Code
The Portfolio Manager will be available to answer questions about this
Code or other compliance-related matters.
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Form 1 Appendix 1
PERSONAL HOLDINGS IN SECURITIES
The Allied Owners Fund Inc.
(monthly report, due the 10th)*
In accordance with the Code of Ethics, please provide a list of all
securities (other than interests in open-end investment companies) in which you,
as a Covered Person, have a Beneficial Interest including those in accounts of
your Immediate Family and all securities in non-client accounts if any for which
you make investment decisions.
(1) Name of Covered Person _________________________________
(2) If different, name of the person
(in whose name the account is held) _________________________________
(3) Relationship of (2) to (1) _________________________________
(4) Broker where account is maintained _________________________________
(5) Account number _________________________________
(6) Contact person at broker and phone number _________________________________
___________
* After initial submission Form 1 will be satisfied by submission of monthly
accounts of securities transactions. Also Covered Persons may satisfy the
reporting requirement on Form 1 for Immediate Family members by submitting to
the Portfolio Manager, by the 10th, such monthly accounts of securities
transactions.
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(7) For each account, attach the most recent account statement. If you own
Beneficial Interests in securities not listed in an attached account
statement, list them below:
Name of Security Quantity Value Custodian
---------------- -------- ----- ---------
1. _____________________________________________________________________________
2. _____________________________________________________________________________
3. _____________________________________________________________________________
4. _____________________________________________________________________________
(attach separate sheet if necessary)
I certify that this form and the attached statements (if any)
constitute all the securities in which I have a Beneficial Interest.
_________________________
Covered Person Signature
Dated: _____________ _________________________
Print Name
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Form 3 Appendix 2
PRE-CLEARANCE REQUEST FOR ACCESS PERSONS
1. Access Person (and trading entity, if different): __________________________
2. Security: _______________________________________________
3. Maximum quantity to be purchased: / / _________________________________
sold / / ____________________________________
4. Name and phone number of broker to effect transaction: ______________________
5. Check as applicable: Purchase ____ Market Order ____ Sale ___ Limit Order ___
(Limit Order Price ___________)
6. In connection with the foregoing transaction, I represent as follows:
(a) I do not possess any material nonpublic information regarding the issuer
of the security.
(b) To my knowledge:
(1) the securities or equivalent securities are not held by the Fund.
(2) there are no outstanding purchase or sell orders for the security by
the Fund.; and
(3) the security is not actively being considered for purchase or sale by
the Fund.
_________________________
Covered Person Signature
_________________________
Print Name
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Form 3 Appendix 3
QUARTERLY CODE OF ETHICS QUESTIONNAIRE
for
COVERED PERSONS
of
THE ALLIED ACTION OWNERS FUND, INC.
Covered Persons are required to answer the questions below for each
calendar quarter and sign and return the questionnaire to the Portfolio Manager
by the 10th of the next month.
1. Have you obtained pre-clearance for all if any securities
transactions in which you have, or a member of your Immediate Family has, a
Beneficial Interest, except for transactions exempt from pre-clearance?
Yes _____ No _____
2. Have you reported all securities transactions in which you have, or
a member of your Immediate Family has, a Beneficial Interest, except for
transactions exempt from reporting? Yes _____ No _____
3. Have you arranged for the Portfolio Manager to receive directly from
your broker transaction confirmations and periodic statements for each account
if any in which you have, or a member of your Immediate Family has, a Beneficial
Interest? Yes _____ No _____
4. Have you complied with the Code of Ethics in all other respects,
including the gift disclosure policy? Yes _____ No _____
5. Are you or any member of your Immediate Family a director or an
officer of any for-profit, privately held companies? Yes _____ No _____.
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6. If the answer to no. 5 is yes, have you listed on the attachment
each company for which you or a member of your Immediate Family is a director.
Yes _____ No _____.
7. If the answer is to no. 5 is yes, is there a reasonable expectation
that any of the private companies for which you or a member of your Immediate
Family is a director or an officer will go public or be acquired within the next
12 months? Yes _____ No _____.
8. Have you listed all reportable gifts on the attachment? Yes _____ No
_____.
"No" answers to nos. 1-4 or 6 require an attached explanation.
I represent that, to the best of my knowledge, the foregoing responses
are correct. I understand that an incorrect response may subject me to
disciplinary action.
________________________
Covered Person Signature
Dated: _____________ ________________________
Print Name
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ATTACHMENT TO
QUARTERLY CODE OF ETHICS QUESTIONNAIRE
(to explain all "No" answers to nos. 1-4 and 6 and to list reportable gifts)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Reportable Gifts? Yes_____ No_____.
Month Given(G)/ Received(R) Description Estimated Value
----- --------------------- ----------- ---------------
1. ___________________________________________________________________________
2. ___________________________________________________________________________
3. ___________________________________________________________________________
4. ___________________________________________________________________________
5. ___________________________________________________________________________
6. __________________________________________________________________________
7. __________________________________________________________________________
8. __________________________________________________________________________
9. __________________________________________________________________________
10. _________________________________________________________________________
(continue on an additional sheet if necessary)
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Appendix 4
ACKNOWLEDGMENT OF RECEIPT OF CODE OF ETHICS
I have received the Code of Ethics dated __________, 2000, and
represent that I will comply with the Code in all respects.
________________________
Covered Person Signature
Dated: _____________ ________________________
Print Name
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Appendix 5
CERTAIN DEFINITIONS
Access Person means (1) every officer and director of Privateer or the
Fund; (2) every employee of the Fund or Privateer who, in connection with his or
her regular functions, makes, participates in or obtains non-public information
regarding the purchase or sale of securities by the Fund; (3) every employee
of the Fund or Privateer involved in making purchase or sale recommendations
for the Fund; (4) every employee of the Fund or Privateer who obtains
information concerning such recommendations prior to their dissemination; and
(5) every agent of the Fund or Privateer who would be deemed an Access Person
if he or she were an employee. Any uncertainty as to whether an individual is
an Access Person should be brought to the attention of the Portfolio Manager.
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. A Covered Person is deemed to have a Beneficial Interest in
securities owned by members of his or her Immediate Family. Common examples of
Beneficial Interest include joint accounts, spousal accounts, UTMA accounts,
partnerships, trusts and controlling interests in corporations. Any uncertainty
whether a Covered Person has a Beneficial Interest in a security should be
brought to the attention of the Portfolio Manager. Such questions will be
resolved by reference to the principles set forth in the definition of
"beneficial owner" found in Rules 16a-1(a)(2) and (5) promulgated under the
Securities Exchange Act of 1934.
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Immediate Family of a Covered Person means any of the following persons
who reside in the same household as the Covered Person: spouse, child,
grandparent, son-in-law, stepchild, daughter-in-law, grandchild, sibling,
brother-in-law, parent, mother-in-law, sister-in-law, stepparent and
father-in-law and includes adoptive relationships and any other relationship
(whether or not recognized by law) that the Portfolio Manager determines could
lead to possible conflicts of interest.
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