WATERFORD MANAGEMENT, LLC
Code of Ethics
I. INTRODUCTION.
Waterford Management, LLC (the "Adviser") serves as an investment manager
to investment companies ("Funds") registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as well as to other clients. The Adviser has
adopted this code of ethics in compliance with Rule 17j-1 under the 1940 Act and
the principles in Section 206 of the Investment Advisers Act of 1940.
It is unlawful for any Access Person of the Adviser, in connection with
the purchase or sale, directly or indirectly, by that person of a Security held
or to be acquired by any client of the Adviser:
1. To employ any device, scheme or artifice to defraud the client;
2. To make to the client any untrue statement of a material fact or omit
to state to the client 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 which operates
or would operate as a fraud or deceit upon the client; or
4. To engage in any manipulative practice with respect to the client.
Rule 17j-1(c) requires the Adviser to adopt a written code of ethics
containing provisions reasonably necessary to prevent its Access Persons from
engaging in any act, practice or course of business prohibited by Rule 17j-1(b).
Rule 17j-1(c) also requires the Adviser to use reasonable diligence and
institute procedures reasonably necessary to prevent violations of this code.
Accordingly, the code of ethics of the Adviser is set forth below:
II. DEFINITIONS.
A. "Access Person," means any member, officer or Advisory Person of
the Adviser.
B. "Acquisition" or "Acquire" includes any purchase and the receipt
of any gift or bequest of any Covered Security.
C. "Advisory Person" means
1. Any employee of the Adviser:
a. Who, in connection with his or her regular functions or
duties, makes, participates in or obtains information about
the purchase or sale of securities held or to be acquired by
any Fund, or
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b. Whose functions relate to the making of any recommendations
about these purchases or sales;
2. Any natural person in a Control relationship to the Adviser
who obtains information concerning recommendations made to
any Fund about the purchase or sale of securities held or to
be acquired; and
3. Such other persons as the Compliance Supervisor shall
designate.
D. "Affiliate Account" means, as to any Access Person, an Account:
1. Of any Family Member of the Access Person;
2. For which the Access Person acts as a custodian, trustee or
other fiduciary;
3. Of any corporation, partnership, joint venture, trust, company
or other entity which is neither subject to the reporting
requirements of section 13 or 15(d) of the Securities Exchange
Act of 1934 (the "1934 Act") nor registered under the 1940 Act
and in which the Access Person or a Family Member has a direct
or indirect Beneficial Ownership; and
4. Of any member or officer of the Adviser.
E. "Beneficial Ownership" means a direct or indirect "pecuniary
interest" (as defined in subparagraph (a)(2) of rule 16a-1 under the
Securities Exchange (the "1934 Act") that is held or shared by a
person directly or indirectly (through any contract, arrangement,
understanding, relationship or otherwise) in a Security. While the
definition of "pecuniary interest" in subparagraph (a)(2) of rule
16a-1 is complex, this term generally means the opportunity directly
or indirectly to profit or share in any profit derived from a
transaction in a Security. An Access Person is presumed to have
Beneficial Ownership of any Family Member's account.
F. "Business day" refers to any day on which the New York Stock
Exchange is open for business.
G. "Client Account" means any account for which the Adviser provides
services, including investment advice and investment decisions, that
is not a Fund.
H. "Compliance Supervisor" means any officer or employee of the Adviser
designated to receive and review reports of purchases and sales
by Access Persons.
I. "Control" has the same meaning as in section 2(a)(9) of the 1940
Act. Section 2(a)(9) defines "Control" as the power to exercise a
Controlling influence over the management or policies of a company,
unless this power is solely the result of an official position with
the company.
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J. "Covered Security" means a Security as defined in section 2(a)(36)
of the 1940 Act, other than:
1. Direct obligations of the government of the United States.
2. Bankers' acceptances, bank certificates of deposit, commercial
paper and high quality short-term debt instruments, including
repurchase agreements.
3. Shares issued by open-end management investment companies
registered under the 1940 Act.
4. Any other Security determined by the Securities and Exchange
Commission ("SEC") or its staff to be excluded from the
definition of "Covered Security" contained in rule 17j-1 under
the 1940 Act.
K. "Covered Security held or to be acquired" means:
1. Any Covered Security which, within the most recent 15 days:
a. Is or has been held by any Fund or Client Account; or
b. Is being or has been considered for purchase by any Fund or
Client Account. A Covered Security is "being or has been
considered for purchase" when the portfolio manager for a
Fund or Client Account is giving or has given serious
consideration to a purchase of the Covered Security.
2. Any option to purchase or sell, and any Security convertible
into, or exchangeable for, a Covered Security described in
paragraph 1 of this definition.
L. "Disposition" or "Dispose" includes any sale and the making of any
personal or charitable gift of covered securities.
M. "Family Member" of an Access Person means:
1. That person's spouse or minor child who resides in the same
household;
2. Any adult related by blood, marriage or adoption to the Access
Person (a "relative") who shares the Access Person's household;
and
3. Any relative dependent on the Access Person for financial
support.
4. Family member includes any other relationship (whether or not
recognized by law) which the Compliance Supervisor determines
could lead to the possible conflicts of interest or appearances
of impropriety this Code is intended to prevent. The Compliance
Supervisor may from time-to-time circulate such expanded
definition of this term as it deems appropriate.
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N. "Initial Public Offering" means an offering of securities registered
under the Securities Act of 1933 (the "1933 Act"), the issuer of
which, immediately before the registration, was not subject to the
reporting requirements of section 13 or 15(d) of the 1934 Act.
O. "Limited Offering" means an offering that is exempt from
registration under the 1933 Act pursuant to section 4(2) or section
4(6) of the 1933 Act or rule 504, 505 or 506 under the 1933 Act.
P. "Material Non-Public Information" about an issuer is information,
not yet released to the public, that would have a substantial
likelihood of affecting a reasonable investor's decision to buy or
sell any securities of that issuer.
Q. "1940 Act" means the Investment Company Act of 1940 and the rules
thereunder, both as amended from time to time, and any order or
orders thereunder which may from time to time be applicable to any
Fund.
R. "Purchase or sale of a Security" includes, among other things,
transactions in options to purchase or sell a Security.
S. "Security" has the same definition as in section 2(a)(36) of the
1940 Act
T. "Unlawful Action" means any of the actions, engaged in by an Access
Person of the Trust, the Adviser a Subadviser, listed in paragraphs
1 through 4 of the Introduction to this code.
III. PROHIBITED PURCHASES AND SALES.
A. Timing of Personal Transactions.
No Access Person may purchase or sell, directly or indirectly, any
Covered Security in which the Access Person or an Affiliate Account
has, or by reason of the transaction acquires, any direct or
indirect Beneficial Ownership if the Access Person knows or
reasonably should know that the Covered Security, at the time of the
purchase or sale:
1. Is being considered for purchase or sale by a Fund or Client
Account; or
2. Is being purchased or sold by a Fund or Client Account.
B. Improper Use of Information.
No Access Person may use his or her knowledge about the securities
transactions or holdings of a Fund or Client Account in trading for
any account that is directly or indirectly beneficially owned by the
Access Person or for any Affiliate Account. Any investment ideas
developed by an Access Person must be made available to the Funds
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and Client Accounts before the Access Person may engage in personal
transactions or transactions for an Affiliate Account based on these
ideas.
C. Front-Running.
No Access Person may engage in front-running an order or
recommendation for a Fund, regardless of who is handling or
generates the order or recommendation. Front-running means
purchasing or selling the same or underlying securities, or
derivatives based on these securities, ahead of and based on a
knowledge of Fund or Client Account securities transactions that are
likely to affect the value of these securities.
D. Initial Public Offerings.
No Advisory Person may acquire any securities in an Initial Public
Offering.
E. Limited Offerings.
No Advisory Person may acquire any securities in a Limited Offering
without first obtaining pre-clearance and approval from the
Compliance Supervisor.
F. Pre-Clearance.
All Advisory Persons must receive pre-clearance from the Compliance
Supervisor for all personal Covered Securities transactions.
G. Blackout Periods.
An Advisory Person may not buy or sell a Covered Security held by or
to be acquired for investment accounts in which the Access Person
has any direct or indirect Beneficial Ownership for seven business
days before and seven business days after a Fund or Client Account's
transaction in that Covered Security.
H. Short-Term Trading.
Advisory Persons are prohibited from profiting from the purchase and
sale of the same or an equivalent Covered Security within any
sixty-day calendar period. Any profits realized from a sale
prohibited by this Section must be disgorged. The Compliance
Supervisor may authorize such transactions; however, such
authorization will not be granted absent extraordinary
circumstances.
IV. EXEMPTED TRANSACTIONS.
The prohibitions of section III of this Code do not apply to:
A. Non-Controlled Accounts. Purchases or sales effected in any account
over which the Access Person has no direct or indirect influence or
Control;
B. Ineligible Securities. Purchases or sales of securities which are
not eligible for purchase or sale by any Fund;
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C. Non-Volitional Transactions. Purchases or sales which are
non-volitional on the part of the Access Person;
D. Automatic Dividend Reinvestments. Purchases which are part of an
automatic dividend reinvestment plan;
E. Exercises and Sales of Rights. Purchases effected upon the exercise
of rights issued by an issuer pro rata to all holders of a class of
its securities, to the extent these rights were acquired from the
issuer, and sales of these rights so acquired;
F. Gifts. The receipt of securities as gifts and bequests and the
making of personal or charitable gifts or bequests of securities;
and
G. Pre-Approved Transactions. Purchases or sales that receive the prior
approval of the Compliance Supervisor or a member of the Adviser's
investment committee, because:
1. They are only remotely potentially harmful to the Funds,
2. They would be unlikely to affect a highly institutional market,
or
3. They clearly are not related economically to the securities to
be purchased, sold or held by the Funds.
V. REPORTING.
An Access Person must submit to the Compliance Supervisor, on forms
designated by the Compliance Supervisor, the following reports as to all
covered securities and brokerage accounts in which the Access Person has,
or by reason of a transaction, acquires, Beneficial Ownership:
A. Initial Holdings Reports. Not later than 10 days after an Access
Person becomes an Access Person:
1. The title, number of shares and principal amount of each Covered
Security in which the Access Person had any direct or indirect
Beneficial Ownership when the Access Person became an Access
Person;
2. The name of any broker, dealer or bank with whom the Access
Person maintained an account containing securities (including
but not limited to covered securities) in which the Access
Person had any direct or indirect Beneficial Ownership as of the
date the Access Person became an Access Person; and
3. The date the report is being submitted by the Access Person.
B. Quarterly Transaction Reports. Not later than 10 days after the end
of each calendar quarter:
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1. Covered Securities Transactions. For any acquisition or
Disposition during the calendar quarter of a Covered Security in
which the Access Person had any direct or indirect Beneficial
Ownership:
a. The date of the acquisition or Disposition, the title, the
interest rate and maturity date (if applicable), the number
of shares and the principal amount of each Covered Security;
b. The nature of the acquisition or Disposition (i.e.,
purchase, sale, gift or any other type of acquisition or
Disposition):
c. The price of the Covered Security at which the acquisition
or Disposition was effected;
d. The name of the broker, dealer or bank with or through which
the acquisition or Disposition was effected; and
e. The date the report is being submitted by the Access Person.
2. Brokerage Accounts. For any account established by the Access
Person containing securities (including but not limited to
covered securities) in which the Access Person had a direct or
indirect Beneficial Ownership during the quarter:
a. The name of the broker, dealer or bank with whom the Access
Person established the account;
b. The date the account was established; and
c. The date the report is being submitted by the Access Person.
3. If There Are No Transactions or New Accounts. If no reportable
transactions in any covered securities were effected or new
accounts opened during a calendar quarter, the affected Access
Person must submit to the Compliance Supervisor, within ten
calendar days after the end of the quarter, a report stating
that no reportable covered securities transactions were effected
and no new accounts were opened during the quarter
C. Annual Holdings Reports. By a date specified by the Compliance
Supervisor and as of a date within 30 days before this reporting
deadline, the following information:
1. The title, number of shares and principal amount of each Covered
Security in which the Access Person had any direct or indirect
Beneficial Ownership;
2. The name of any broker, dealer or bank with whom the Access
Person maintained an account containing securities (including
but not limited to covered securities) in which the Access
Person had any direct or indirect Beneficial Ownership; and
3. The date the report is being submitted by the Access Person.
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D. Disclaimer of Beneficial Ownership. Any report submitted by an
Access Person in accordance with this Code may contain a statement
that the report will not be construed as an admission by that person
that he or she has any direct or indirect Beneficial Ownership in
any Covered Security or brokerage account to which the report
relates. The existence of any report will not by itself be construed
as an admission that any event included in the report is a violation
of this code.
E. Alternative Reporting Procedures. To the extent consistent with rule
17j-1 under the 1940 Act, and rule 204-2(a)(12) under the Investment
Advisers Act of 1940, the Compliance Supervisor may approve other
alternative reporting procedures.
F. Duplicate Brokerage Confirmations. For transactions executed through
a broker, an Access Person may fulfill his or her reporting
requirement by directing the broker(s) to transmit to the Compliance
Supervisor duplicate confirmations of these transactions. The
duplicate confirmations should be addressed "Personal and
Confidential."
G. Annual Certification of Compliance. Each Access Person must certify
annually (by a date specified by and on the form designated by the
Compliance Supervisor) that the Access Person:
1. Has received, read and understand this Code of Ethics and
recognizes that the Access Person is subject to the Code;
2. Has complied with all the requirements of this Code of Ethics;
and
3. Has disclosed or reported all personal securities transactions,
holdings and accounts required by this Code of Ethics to be
disclosed or reported.
VI. CONFIDENTIALITY.
A. Non-Disclosure of Confidential Information. No Access Person, except
in the course of his or her duties, may reveal to any other person
any information about securities transactions being considered for,
recommended to or executed on behalf of any Fund or Client Account.
B. Confidentiality of Information in Access Persons' Reports. All
information obtained from any Access Person under this Code normally
will be kept in strict confidence by the Adviser. However:
1. Reports of transactions and other information obtained under
this Code may be made available to the SEC, any other regulatory
or self-regulatory organization or any other civil or criminal
authority or court to the extent required by law or regulation
or to the extent considered appropriate by the trustees of the
Trust.
2. In the event of violations or apparent violations of the Code,
this information may be disclosed to the trustees and officers
of a Fund, to appropriate management and supervisory personnel
of the Adviser, and to any legal counsel to the above persons.
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VII. FIDUCIARY DUTIES
A. Gifts.
Access Persons may not accept gifts from clients, brokers, vendors,
or other persons not affiliated with the Adviser. However, 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 an Access Person receives any gift that might be prohibited under
this Code, the Access Person must inform the Compliance Department.
B. Service as a Director.
Access Persons must report any service as a director of a publicly
held company. The Compliance Supervisor shall review at the outset
and from time-to-time the appropriateness of such service in light
of the objectives of this Code. The Compliance Supervisor may in
certain cases determine that such service is inconsistent with these
objectives; and it may in others require that the affected Access
Person be isolated, through a "Chinese Wall" or other procedures,
from those making investment decisions related to the issuer on
whose board the person sits.
VIII. DUTIES OF THE COMPLIANCE SUPERVISOR.
A. Identifying and Notifying Access Persons. The Compliance Supervisor
will identify each Access Person and notify each Access Person that
the person is subject to this Code of Ethics, including the
reporting requirements.
B. Providing Information to Access Persons. The Compliance Supervisor
will furnish all Access Persons with a copy of this Code and provide
advice, with the assistance of counsel, about the interpretation of
this Code.
C. Reviewing Reports. The Compliance Supervisor will review the reports
submitted by each Access Person to determine whether there may have
been any transactions prohibited by this Code of Ethics. -
D. Maintaining Records. The Adviser will:
1. Preserve in an easily accessible place a copy of this Code of
Ethics and any other Code of Ethics that has been in effect at
any time within the past five years;
2. Maintain in an easily accessible place a list of all Access
Persons who are, or within the past five years have been,
required to make reports;
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3. Preserve for a period of not less than five years from the end
of the fiscal year in which it was made, the first two years in
an easily accessible place, a copy of each report submitted by
an Access Person and a copy of any written memoranda prepared by
the Compliance Supervisor in connection therewith;
4. Preserve 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 occurs a record of any violation of this code of
ethics and of any action taken as a result of that violation;
5. Preserve for a period of not less than five years from the end
of the fiscal year in which it was made, the first two years in
an easily accessible place, a copy of
a. Each report made to the Board of a Fund, including any
written report describing any material violations of the
Code or procedures or sanctions imposed in response to
material violations and
b. Any documents certifying that the Adviser has adopted
procedures reasonably necessary to prevent Access Persons
from violating this Code; and
6. Maintain a record of any decision, and the reasons supporting
the decision, to approve the acquisition by an Advisory Person
of securities in a Limited Offering for at least five years
after the end of the fiscal year in which the approval is
granted.
IX. SANCTIONS.
Upon determining that an Access Person has violated this Code of Ethics,
the Compliance Supervisor, after consulting with the Access Person's
supervisor, may impose such sanctions as the Compliance Supervisor deems
appropriate. These include, but are not limited to, a letter of censure,
disgorgement of profits obtained in connection with a violation, the
imposition of fines, restrictions on future personal trading, termination
of the Access Person's position or relationship with the Adviser or
referral to civil or criminal authorities.
Adopted: June 30, 2000
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APPENDIX A
Beneficial Ownership
The only guidance as to what constitutes Beneficial Ownership is provided
by rules and releases of the SEC and court cases, which generally may be
summarized as follows:
A. Securities Owned of Record or Held in Your Name.
Securities owned of record or held in your name are generally considered
to be beneficially owned by you.
B. Securities Held in the Name of Any Other Person.
Securities held in the name of any other person are deemed to be
beneficially owned by you if, because of any contract, understanding,
relationship, agreement or other arrangement, you obtain benefits substantially
equivalent to those of ownership. These benefits include the power to vote, or
to direct the Disposition of, securities.
Beneficial ownership includes securities held by others for your benefit
(regardless of record ownership), e.g.:
Securities held for you or Family Members (as defined in the code of
ethics) by agents, custodians, brokers, trustees, executors or other
administrators; Securities owned by you, but which have not been
transferred into your name on the records of the issuer; Securities which
you have pledged; Securities owned by a partnership of which you are a
member; and Securities owned by your personal holding corporation.
You are presumed to beneficially own securities held in the name or for
the benefit of Family Members, unless because of special and countervailing
circumstances, you do not enjoy benefits substantially equivalent to ownership.
Benefits substantially equivalent to ownership include, for example:
Application of the income derived from these securities to maintain a
common home or to meet expenses which that person otherwise would meet
from other sources, and the ability to exercise a Controlling influence
over the purchase, sale or voting of these securities.
You are also presumed to be the beneficial owner of securities held in the
name of some other person, even though you do not obtain benefits of ownership,
if you can vest or revest title in yourself either immediately or at some future
time.
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C. Rights to Acquire Securities Within Sixty Days.
In addition, SEC rules deem a person to be the beneficial owner of a
Security if that person has the right to acquire Beneficial Ownership of that
Security at any time (within 60 days) including but not limited to any rights to
acquire the Security:
Through the exercise of any option, warrant or right;
Through the conversion of a Security; or
Pursuant to the power to revoke a trust, discretionary account, or similar
arrangement.
D. Securities Held in Trust.
Beneficial ownership includes the ownership of securities held in trust by
you, as a trustee, if either you or a Family Member has a vested beneficial
interest in the income, principal or other assets of the trust. As settlor of a
trust you also have Beneficial Ownership of securities in the trust, if you as
the settlor have the power to revoke the trust without obtaining the consent of
the beneficiaries. There are certain exemptions to these trust Beneficial
Ownership rules. One of these exemptions applies if you would have Beneficial
Ownership of securities solely because of being a settlor or beneficiary of the
trust, but your approval is not needed for the trust to own, acquire or Dispose
of securities.
E. Securities Held Indirectly.
Stockholders or partners of a company who use it as a personal securities
trading or investment medium are presumed to be beneficial owners of their
proportionate shares of these securities and investments if the company has no
other substantial business. A general partner of a partnership is considered to
have indirect Beneficial Ownership in the interest in securities held by the
partnership.
You will not be deemed to have any indirect Beneficial Ownership in
portfolio securities held by:
any holding company registered under the Public Utility Holding Company
Act of 1935;
any investment company registered under the Investment Company Act of
1940;
an employee pension or retirement plan;
or a business trust with more than 25 beneficiaries.
F. Other Considerations.
Beneficial ownership must be determined in light of the facts of a
particular case. Thus, while you may have to report Security holdings and
brokerage accounts of Family Members, you may nonetheless disclaim Beneficial
Ownership of these securities and accounts. Contact the Compliance Supervisor if
you have any questions about how to determine whether you have Beneficial
Ownership of securities.
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