EXHIBIT (r)
CODE OF ETHICS OF THE REGISTRANT, THE MANAGER
AND THE PLACEMENT AGENT.
CODE OF ETHICS FOR PERSONAL INVESTING BY
ACCESS PERSONS OF THE PAINEWEBBER ALTERNATIVE INVESTMENT GROUP FUNDS
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INTRODUCTION
Rule 17j-1 under the Investment Company Act of 1940 provides that it
is unlawful for any Access Person,1 in connection with the purchase or sale of
any Covered Security2 held or to be acquired by a Fund3 (other than a money
market fund or a Fund that does not invest in Covered Securities) to:
o employ any device, scheme or artifice to defraud the Fund;
o make any untrue statement of a material fact to the Fund or
omit to state a material fact necessary in order to make the
statements made to the Fund, in light of the circumstances
under which they are made, not misleading;
o engage in any act, practice or course of business that
operates or would operate as a fraud or deceit on the Fund; or
o engage in any manipulative practice with respect to the
Fund.
Rule 17j-1 also provides that funds and their advisers and principal
underwriters must adopt Codes of Ethics containing provisions reasonably
necessary to prevent Access Persons from violating Rule 17j-1. Accordingly, the
PaineWebber Alternative Investment Group and the PaineWebber Alternative
Investment Group Funds have adopted this Code of Ethics. THIS CODE APPLIES TO
YOU IF YOU ARE AN ACCESS PERSON FOR ANY PAINEWEBBER ALTERNATIVE INVESTMENT GROUP
FUND AND YOU ARE A DIRECTOR OF THE PAINEWEBBER ALTERNATIVE INVESTMENT GROUP
FUNDS OR AN OFFICER, DIRECTOR OR EMPLOYEE OF THE PAINEWEBBER ALTERNATIVE
INVESTMENT GROUP.
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1 "Access Person" is defined in Rule 17j-1, a copy of which is attached to
this Code as Exhibit A.
2 "Covered Security" is defined in Rule 17j-1, a copy of which is attached
to this Code as Exhibit A.
3 "Fund" is defined in Rule 17j-1, a copy of which is attached to this
Code as Exhibit A.
<PAGE>
PROVISIONS
PROVISION ONE: PERSONAL RESPONSIBILITY. You must take personal
responsibility for assuring that your personal securities transactions are not
connected with any of the fraudulent conduct described above. PaineWebber has
adopted policies and procedures to help you make this determination. However,
PaineWebber places primary responsibility for this determination with you.
Therefore, you must assure that your personal investing does not violate this
Code of Ethics before you submit a proposed personal investment transaction for
any reviews or approvals required by this Code or by any other PaineWebber
policies or procedures regarding personal investing.
PROVISION TWO: DISCLOSURE. You must report the following:
o HOLDINGS. You must disclose your personal securities holdings
within ten days of becoming an Access Person and again, annually,
unless you are an independent director of a PaineWebber
Alternative Investment Group Fund.
o TRANSACTIONS. You must notify PaineWebber of all personal
transactions in Covered Securities at least quarterly, unless you
are an independent director of a PaineWebber Alternative
Investment Group Fund.
If you are an independent director of a PaineWebber Alternative
Investment Group Fund, you must make quarterly transaction
reports only if, during the preceding quarter, you traded a
security when you knew, or reasonably should have known that a
Fund had traded the same security within the prior 15 days or
would be trading the same security within the next 15 days.
PROVISION THREE: PRECLEARANCE OF IPOS AND PRIVATE PLACEMENTS. If, in
connection with your regular duties, you make or participate in making
investment recommendations or decisions for the purchase or sale of any Covered
Security by a Fund, you must obtain written permission from PaineWebber before
you may purchase initial public offerings or private placements.
ADMINISTRATION AND ENFORCEMENT
ADMINISTRATION AND PAINEWEBBER ALTERNATIVE INVESTMENT GROUP FUND
OVERSIGHT. The PaineWebber Alternative Investment Group is responsible for
administering and enforcing this Code and has full authority to impose
penalties, including without limitation, disgorgement, fines, and termination of
the employment of the parties subject to this Code. PaineWebber will report at
least annually on its administration of this Code to the Board of the
PaineWebber Alternative Investment Group Funds.
POLICIES AND PROCEDURES FOR PERSONAL INVESTING. The Alternative
Investment Group has instituted policies and procedures ("Procedures")
reasonably necessary to assure that you do not violate this Code of Ethics. YOU
ARE RESPONSIBLE FOR COMPLYING WITH ALL PROCEDURES THAT APPLY TO YOU. Among other
things, the Procedures:
o limit your ability to trade Covered Securities at the same time
as a Fund, if you participate in its management;
o require you to preclear certain transactions in Covered
Securities and specify the process for obtaining that
preclearance;
o provide forms and instructions for reporting transactions and for
preclearance of IPOs and private placements; and
o require you to certify at least annually that you have conducted
all personal transactions in Covered Securities in accordance
with this Code of Ethics and related PaineWebber procedures.
<PAGE>
EXHIBIT A
SS. 270.17J-1 PERSONAL INVESTMENT ACTIVITIES OF INVESTMENT COMPANY PERSONNEL.
(a) DEFINITIONS. For purposes of this section:
(1) ACCESS PERSON means:
(i) Any director, officer, general partner or Advisory Person of a Fund or
of a Fund's investment adviser.
(A) If an investment adviser is primarily engaged in a business or
businesses other than advising Funds or other advisory clients, the
term ACCESS PERSON means any director, officer, general partner or
Advisory Person of the investment adviser who, with respect to any
Fund, makes any recommendation, participates in the determination of
which recommendation will be made, or whose principal function or
duties relate to the determination of which recommendation will be
made, or who, in connection with his or her duties, obtains any
information concerning recommendations on Covered Securities being
made by the investment adviser to any Fund.
(B) An investment adviser is "primarily engaged in a business or
businesses other than advising Funds or other advisory clients" if,
for each of its most recent three fiscal years or for the period of
time since its organization, whichever is less, the investment adviser
derived, on an unconsolidated basis, more than 50 percent of its total
sales and revenues and more than 50 percent of its income (or loss),
before income taxes and extraordinary items, from the other business
or businesses.
(ii) Any director, officer or general partner of a principal underwriter
who, in the ordinary course of business, makes, participates in or
obtains information regarding, the purchase or sale of Covered
Securities by the Fund for which the principal underwriter acts, or
whose functions or duties in the ordinary course of business relate to
the making of any recommendation to the Fund regarding the purchase or
sale of Covered Securities.
(2) ADVISORY PERSON of a Fund or of a Fund's investment adviser means:
(i) Any employee of the Fund or investment adviser (or of any company
in a control relationship to the Fund or investment adviser) who, in
connection with his or her regular functions or duties, makes,
participates in, or obtains information regarding the purchase or sale
of Covered Securities by a Fund, or whose functions relate to the
making of any recommendations with respect to the purchases or sales;
and
(ii) Any natural person in a control relationship to the Fund or
investment adviser who obtains information concerning recommendations
made to the Fund with regard to the purchase or sale of Covered
Securities by the Fund.
(3) CONTROL has the same meaning as in section 2(a)(9) of the Act [15 U.S.C.
80a-2(a)(9)].
(4) COVERED SECURITY means a security as defined in section 2(a)(36) of the Act
[15 U.S.C. 80a-2(a)(36)], except that it does not include:
(i) Direct obligations of the Government of the United States;
(ii) Bankers' acceptances, bank certificates of deposit, commercial
paper and high quality short-term debt instruments, including
repurchase agreements; and
(iii) Shares issued by open-end Funds.
(5) FUND means an investment company registered under the Investment Company
Act.
(6) An INITIAL PUBLIC OFFERING means an offering of securities registered under
the Securities Act of 1933 [15 U.S.C. 77a], the issuer of which, immediately
before the registration, was not subject to the reporting requirements of
sections 13 or 15(d) of the Securities Exchange Act of 1934 [15 U.S.C. 78m
or 78o(d)].
(7) INVESTMENT PERSONNEL of a Fund or of a Fund's investment adviser means:
(i) Any employee of the Fund or investment adviser (or of any company
in a control relationship to the Fund or investment adviser) who, in
connection with his or her regular functions or duties, makes or
participates in making recommendations regarding the purchase or sale
of securities by the Fund.
(ii) Any natural person who controls the Fund or investment adviser and
who obtains information concerning recommendations made to the Fund
regarding the purchase or sale of securities by the Fund.
(8) A LIMITED OFFERING means an offering that is exempt from registration
under the Securities Act of 1933 pursuant to section 4(2) or section 4(6)
[15 U.S.C. 77d(2) or 77d(6)] or pursuant to rule 504, rule 505, or rule 506
[17 CFR 230.504, 230.505, or 230.506] under the Securities Act of 1933.
(9) PURCHASE OR SALE OF A COVERED SECURITY includes, among other things, the
writing of an option to purchase or sell a Covered Security.
(10) SECURITY HELD OR TO BE ACQUIRED by a Fund means:
(i) Any Covered Security which, within the most recent 15 days:
(A) Is or has been held by the Fund; or
(B) Is being or has been considered by the Fund or its investment
adviser for purchase by the Fund; and
(ii) Any option to purchase or sell, and any security convertible into
or exchangeable for, a Covered Security described in paragraph
(a)(10)(i) of this section.
(b) UNLAWFUL ACTIONS. It is unlawful for any affiliated person of or principal
underwriter for a Fund, or any affiliated person of an investment adviser of or
principal underwriter for a Fund, in connection with the purchase or sale,
directly or indirectly, by the person of a 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 to the Fund or omit to state
a material fact necessary in order to make the statements made to the Fund, in
light of the circumstances under which they are made, not misleading;
(3) To engage in any act, practice or course of business that operates or would
operate as a fraud or deceit on the Fund; or
(4) To engage in any manipulative practice with respect to the Fund.
(c) CODE OF ETHICS.
(1) ADOPTION AND APPROVAL OF CODE OF ETHICS.
(i) Every Fund (other than a money market fund or a Fund that does not
invest in Covered Securities) and each investment adviser of and
principal underwriter for the Fund, must adopt a written code of
ethics containing provisions reasonably necessary to prevent its
Access Persons from engaging in any conduct prohibited by paragraph
(b) of this section.
(ii) The board of directors of a Fund, including a majority of directors
who are not interested persons, must approve the code of ethics of the
Fund, the code of ethics of each investment adviser and principal
underwriter of the Fund, and any material changes to these codes. The
board must base its approval of a code and any material changes to the
code on a determination that the code contains provisions reasonably
necessary to prevent Access Persons from engaging in any conduct
prohibited by paragraph (b) of this section. Before approving a code
of a Fund, investment adviser or principal underwriter or any
amendment to the code, the board of directors must receive a
certification from the Fund, investment adviser or principal
underwriter that it has adopted procedures reasonably necessary to
prevent Access Persons from violating the investment adviser's or
principal underwriter's code of ethics. The Fund's board must approve
the code of an investment adviser or principal underwriter before
initially retaining the services of the investment adviser or
principal underwriter. The Fund's board must approve a material change
to a code no later than six months after adoption of the material
change.
(iii) If a Fund is a unit investment trust, the Fund's principal
underwriter or depositor must approve the Fund's code of ethics, as
required by paragraph (c)(1)(ii) of this section. If the Fund has more
than one principal underwriter or depositor, the principal
underwriters and depositors may designate, in writing, which principal
underwriter or depositor must conduct the approval required by
paragraph (c)(1)(ii) of this section, if they obtain written consent
from the designated principal underwriter or depositor.
(2) ADMINISTRATION OF CODE OF ETHICS.
(i) The Fund, investment adviser and principal underwriter must use
reasonable diligence and institute procedures reasonably necessary to
prevent violations of its code of ethics.
(ii) No less frequently than annually, every Fund (other than a unit
investment trust) and its investment advisers and principal
underwriters must furnish to the Fund's board of directors, and the
board of directors must consider, a written report that:
(A) Describes any issues arising under the code of ethics or
procedures since the last report to the board of directors, including,
but not limited to, information about material violations of the code
or procedures and sanctions imposed in response to the material
violations; and
(B) Certifies that the Fund, investment adviser or principal
underwriter, as applicable, has adopted procedures reasonably
necessary to prevent Access Persons from violating the code.
(3) EXCEPTION FOR PRINCIPAL UNDERWRITERS. The requirements of paragraphs (c)(1)
and (c)(2) of this section do not apply to any principal underwriter unless:
(i) The principal underwriter is an affiliated person of the Fund or of
the Fund's investment adviser; or
(ii) An officer, director or general partner of the principal underwriter
serves as an officer, director or general partner of the Fund or of
the Fund's investment adviser.
(d) REPORTING REQUIREMENTS OF ACCESS PERSONS.
(1) REPORTS REQUIRED. Unless excepted
by paragraph (d)(2) of this section, every Access Person of a Fund
(other than a money market fund or a Fund that does not invest in
Covered Securities) and every Access Person of an investment adviser
of or principal underwriter for the Fund, must report to that Fund,
investment adviser or principal underwriter:
(i) INITIAL HOLDINGS REPORTS. No later than 10 days after the person
becomes an Access Person, the following information:
(A) 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 person became an Access Person;
(B) The name of any broker, dealer or bank with whom the Access Person
maintained an account in which any securities were held for the direct
or indirect benefit of the Access Person as of the date the person
became an Access Person; and
(C) The date that the report is submitted by the Access Person.
(ii) QUARTERLY TRANSACTION REPORTS. No later than 10 days after the end of
a calendar quarter, the following information:
(A) With respect to any transaction during the quarter in a Covered
Security in which the Access Person had any direct or indirect
beneficial ownership:
(1) The date of the transaction, the title, the interest rate and
maturity date (if applicable), the number of shares and the
principal amount of each Covered Security involved;
(2) The nature of the transaction (I.E., purchase, sale or any other
type of acquisition or disposition);
(3) The price of the Covered Security at which the transaction was
effected;
(4) The name of the broker, dealer or bank with or through which the
transaction was effected; and
(5) The date that the report is submitted by the Access Person.
(B) With respect to any account established by the Access Person in
which any securities were held during the quarter for the direct or
indirect benefit of the Access Person:
(1) The name of the broker, dealer or bank with whom the Access
Person established the account;
(2) The date the account was established; and
(3) The date that the report is submitted by the Access Person.
(iii) ANNUAL HOLDINGS REPORTS. Annually, the following information (which
information must be current as of a date no more than 30 days before
the report is submitted):
(A) The title, number of shares and principal amount of each Covered
Security in which the Access Person had any direct or indirect
beneficial ownership;
(B) The name of any broker, dealer or bank with whom the Access Person
maintains an account in which any securities are held for the direct
or indirect benefit of the Access Person; and
(C) The date that the report is submitted by the Access Person.
(2) EXCEPTIONS FROM REPORTING REQUIREMENTS.
(i) A person need not make a report under paragraph (d)(1) of this section
with respect to transactions effected for, and Covered Securities held
in, any account over which the person has no direct or indirect
influence or control.
(ii) A director of a Fund who is not an "interested person" of the Fund
within the meaning of section 2(a)(19) of the Act [15 U.S.C.
80a-2(a)(19)], and who would be required to make a report solely by
reason of being a Fund director, need not make:
(A) An initial holdings report under paragraph (d)(1)(i) of this
section and an annual holdings report under paragraph (d)(1)(iii)
of this section; and
(B) A quarterly transaction report under paragraph (d)(1)(ii) of this
section, unless the director knew or, in the ordinary course of
fulfilling his or her official duties as a Fund director, should have
known that during the 15-day period immediately before or after the
director's transaction in a Covered Security, the Fund purchased or
sold the Covered Security, or the Fund or its investment adviser
considered purchasing or selling the Covered Security.
(iii) An Access Person to a Fund's principal underwriter need not make a
report to the principal underwriter under paragraph (d)(1) of this
section if:
(A) The principal underwriter is not an affiliated person of the Fund
(unless the Fund is a unit investment trust) or any investment adviser
of the Fund; and
(B) The principal underwriter has no officer, director or
general partner who serves as an officer, director or general partner
of the Fund or of any investment adviser of the Fund.
(iv) An Access Person to an investment adviser need not make a quarterly
transaction report to the investment adviser under paragraph
(d)(1)(ii) of this section if all the information in the report would
duplicate information required to be recorded under ss.ss.
275.204-2(a)(12) or 275.204-2(a)(13) of this chapter.
(v) An Access Person need not make a quarterly transaction report under
paragraph (d)(1)(ii) of this section if the report would duplicate
information contained in broker trade confirmations or account
statements received by the Fund, investment adviser or principal
underwriter with respect to the Access Person in the time period
required by paragraph (d)(1)(ii), if all of the information required
by that paragraph is contained in the broker trade confirmations or
account statements, or in the records of the Fund, investment adviser
or principal underwriter.
(3) REVIEW OF REPORTS. Each Fund, investment adviser and principal underwriter
to which reports are required to be made by paragraph (d)(1) of this
section must institute procedures by which appropriate management or
compliance personnel review these reports.
(4) NOTIFICATION OF REPORTING OBLIGATION. Each Fund, investment adviser and
principal underwriter to which reports are required to be made by paragraph
(d)(1) of this section must identify all Access Persons who are required to
make these reports and must inform those Access Persons of their reporting
obligation.
(5) BENEFICIAL OWNERSHIP. For purposes of this section, beneficial ownership is
interpreted in the same manner as it would be under ss. 240.16a-1(a)(2) of
this chapter in determining whether a person is the beneficial owner of a
security for purposes of section 16 of the Securities Exchange Act of 1934
[15 U.S.C. 78p] and the rules and regulations thereunder. Any report
required by paragraph (d) of this section may contain a statement that
the report will not be construed as an admission that the person making the
report has any direct or indirect beneficial ownership in the Covered
Security to which the report relates.
(e) PRE-APPROVAL OF INVESTMENTS IN IPOS AND LIMITED OFFERINGS. Investment
Personnel of a Fund or its investment adviser must obtain approval from the
Fund or the Fund's investment adviser before directly or indirectly
acquiring beneficial ownership in any securities in an Initial Public
Offering or in a Limited Offering.
(f) RECORDKEEPING REQUIREMENTS.
(1) Each Fund, investment adviser and principal underwriter that is required to
adopt a code of ethics or to which reports are required to be made by Access
Persons must, at its principal place of business, maintain records in the
manner and to the extent set out in this paragraph (f), and must make these
records available to the Commission or any representative of the Commission
at any time and from time to time for reasonable periodic, special or other
examination:
(A) A copy of each code of ethics for the organization that is in effect, or
at any time within the past five years was in effect, must be maintained in
an easily accessible place;
(B) A record of any violation of the code of ethics, and of any action taken
as a result of the violation, must be maintained in an easily accessible
place for at least five years after the end of the fiscal year in which the
violation occurs;
(C) A copy of each report made by an Access Person as required by this
section, including any information provided in lieu of the reports under
paragraph (d)(2)(v) of this section, must be maintained for at least five
years after the end of the fiscal year in which the report is made or the
information is provided, the first two years in an easily accessible place;
(D) A record of all persons, currently or within the past five years, who
are or were required to make reports under paragraph (d) of this section, or
who are or were responsible for reviewing these reports, must be maintained
in an easily accessible place; and
(E) A copy of each report required by paragraph (c)(2)(ii) of this section
must be maintained for at least five years after the end of the fiscal year
in which it is made, the first two years in an easily accessible place.
(2) A Fund or investment adviser must maintain a record of any decision, and the
reasons supporting the decision, to approve the acquisition by investment
personnel of securities under paragraph (e), for at least five years after
the end of the fiscal year in which the approval is granted.
