J&B FUNDS
10/24/00
CODE OF ETHICS
Terms which are in bold italics in the text are defined in Appendix 1.
I. Purpose of Code.
The Code of Ethics establishes rules that govern personal investment
activities of the officers, directors and certain employees (or
contractors) of each of the series (the "Portfolios") within the J&B
Funds (the "Fund").
II. Why Do We Have a Code of Ethics?
A. Jones & Babson wants to protect its Clients.
We have a duty to place the interests of the shareholders of the
Portfolios first and to avoid even the appearance of a conflict of
interest. This is how we earn and keep the trust of Fund
shareholders. We must conduct ourselves and our personal
securities transactions in a manner that does not create a
conflict of interest with the Portfolios or their shareholders, or
take unfair advantage of our relationship with them.
B. Federal law requires that we have a Code of Ethics
The Investment Company Act of 1940 and the Investment Advisers Act
of 1940 require that we have in place safeguards to prevent
behavior and activities that might disadvantage the Portfolios or
their shareholders. These safeguards are embodied in this Code of
Ethics.1
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III. Does the Code of Ethics Apply to You?
Yes! All employees (including contract personnel) of Jones & Babson and
the Portfolios must observe the principles contained in the Code of
Ethics. Any trustee/director ("Director"), officer, employee or
contractor of Jones & Babson, or any Portfolio who is already subject to
a substantially similar (as determined by J&B's compliance officer) Code
of Ethics because of their association with a separate company, will not
be subject to this Code of Ethics.
There are different categories of restrictions on personal investing
activities; the category in which you have been placed generally depends
on your job function, although unique circumstances may prompt us to
place you in a different category. The range of categories is as follows:
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Fewest Restrictions Most Restrictions
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Non-Access Person Access Person Investment Person Portfolio Person
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In addition, there is a fifth category for the Independent Directors of the
Fund. The standard profiles for each of the categories is described below:
A. Portfolio Persons. Portfolio Persons are those employees entrusted
with direct responsibility and authority to make investment decisions
affecting one or more Portfolios.
B. Investment Persons. Investment Persons are financial analysts,
investment analysts, traders and other employees who provide
information or advice to a portfolio management team or who help
execute the portfolio management team's decisions.
C. Access Persons. You are an Access Person if your job normally requires
you to do any of the following:
participate in the purchase or sale of securities for Portfolios;
perform a function which relates to the making of recommendations
with respect to such purchases or sales of securities for
Portfolios; OR obtain information regarding the purchase or sale
of securities for Portfolios.
In addition, you are an Access Person if you are any of the following:
an officer or "interested" Director of the Fund; OR an officer or
director of Jones & Babson.
As an Access Person, if you know that during the 5 days immediately
preceding or after the date of your transaction, the same security was
(1) held by one or more Portfolio and was being considered for sale,
or (2) being considered for purchase by one or more Portfolio, you
must pre-clear your personal security transaction requests in
accordance with Section IV A.
D. Non-Access Persons. If you are an officer, director, employee or
contractor of Jones & Babson, or any affiliated company AND you do not
fit into any of the above categories, you are a Non-Access Person.
Because you normally do not receive confidential information about
Portfolios, you are subject only to Sections V(B), VI, VII, VIII, IX
and X of this Code of Ethics.
E. Independent Directors. If you are a Director of the Fund and are not
an "interested" Director as defined in the Investment Company Act of
1940 ("Independent Director"), you are subject only to Sections II,
VII, VIII and IX of this Code of Ethics. However, if you know, or in
the ordinary course of fulfilling your official duties as an
Independent Director should know, that during the 5 days immediately
preceding or after the date of your transaction, the same security was
(1) held by one or more Portfolio and was being considered for sale,
or (2) being considered for purchase by one or more Portfolio, you
will be considered an Access Person for the purpose of trading in that
security, and you must comply with all the requirements applicable to
Access Persons.
IV. Restrictions on Personal Investing Activities.
A. Investment and Portfolio Persons Pre-clearance of Personal Securities
Transactions.
Before either of the following things happen:OR
the purchase or sale of a security for your own account;
the purchase or sale of a security for an account for which you
are a beneficial owner
you must follow the following preclearance procedures:
1. Preclear the transaction with J&B's Compliance Officer. E-mail
your request to [email protected] or fill out a pre-clearance
request form, and provide the following information:
Issuer name; Ticker symbol or CUSIP number; Type of security
(stock, bond, note, etc.); Maximum expected dollar amount of
proposed transaction; AND Nature of transaction (purchase or
sale)
2. If you receive preclearance for the transaction2: You have 5
business days to execute your transaction.
B. Investment and Portfolio Persons: Additional Restrictions.
1. Initial Public Offerings.
You cannot acquire securities issued in an initial public
offering.
2. Private Placements.
Before you acquire any securities in a private placement,
you must obtain written approval from J&B's compliance
officer3. Once you receive approval, you cannot participate
in any subsequent consideration of an investment in that
issuer for any of the Portfolios.
3. Short-Term Trading Profits.
You cannot profit from any purchase and sale, or sale and
purchase, of the same (or equivalent) securities within
sixty (60) calendar days.
C. Portfolio Persons: Blackout Period.
If you are a Portfolio Person, you may not purchase or sell a
security within seven (7) days before and after a Portfolio that
you manage executes a trade in that security.
V. Reporting Requirements.
A. Initial Disclosure of Personal Securities Holdings
[Access, Investment and Portfolio Persons]
Upon commencement of employment or acquisition of Access Person
status, whichever is sooner, you must report all securities
holdings to the compliance officer. The report must include all
securities beneficially owned by you (including securities owned
by certain family members), as well as code-exempt securities.
B. Quarterly Report of Securities Transactions
[Access, Investment and Portfolio Persons]
Each quarter you must report the purchase or sale of a security
in which you have (or will have) any direct or indirect
beneficial ownership. This may include securities owned by
certain family members. See Appendix 2 for details. (You do not
need to report transactions in code-exempt securities.) IMA will
provide you with a form of report. You must file your report no
later than 10 days after the end of each calendar quarter.
On the report you must state whether you have engaged in a
securities transaction during the quarter, and if so provide the
following information about each transaction:
The date of the transaction, the description and number of
shares, and the principal amount of each security involved;
The nature of the transaction, that is, purchase, sale or
any other type of acquisition or disposition; The
transaction price; AND The name of the broker, dealer or
bank through whom the transaction was effected.
C. Duplicate Confirmations [Non-Access, Access, Investment and
Portfolio Persons].
You must instruct your broker-dealer to send duplicate
confirmations of all transactions (excluding transactions in
code-exempt securities) in such accounts to:
Jones & Babson Mutual Funds
BMA Tower, 700 Karnes Blvd.
Kansas City, MO 64108-3306
Attention: Compliance Officer
Please note that "your broker-dealer" includes both of the
following:
a broker or dealer with whom you have a securities brokerage
account; AND a broker or dealer who maintains an account for
a person whose trades you must report because you are deemed
to be a beneficial owner.
C. Annual Report of Securities Holdings
[Investment and Portfolio Persons only].
If you are a Portfolio or Investment Person, you must annually
provide to the Compliance Officer or his or her designee a list of
all securities subject to this Code of Ethics for which you are a
registered owner or in which you have a beneficial ownership
interest.
VI. Can there be any exceptions to the restrictions?
Yes. The Compliance Officer or his or her designee, upon consultation
with your manager, may grant limited exemptions to specific provisions of
the Code of Ethics on a case-by-case basis.
A. How to Request an Exemption Send a written request to J&B compliance
officer detailing your situation.
B. Factors Considered
In considering your request, the compliance officer or his or her
designee will grant your exemption request if he or she is satisfied
that:
your request addresses an undue personal hardship imposed on you
by the Code of Ethics; your situation is not contemplated by the
Code of Ethics; and your exemption, if granted, would be
consistent with the achievement of the objectives of the Code of
Ethics.
C. Exemption Reporting
All exemptions granted must be reported to the Board of Directors of
the Fund. The Board of Directors may choose to delegate the task of
receiving and reviewing reports to a Committee comprised of
Independent Directors.
VII. Confidential Information.
All information about Fund securities transactions, actual or
contemplated, is confidential. You must not disclose, except as required
by the duties of your employment, securities transactions of Portfolios,
actual or contemplated, or the contents of any written or oral
communication, study, report or opinion concerning any security. This
does not apply to information which has already been publicly disclosed.
VIII. Conflicts of Interest.
A. All Persons except Independent Directors
You must receive prior written approval from Jones & Babson or the
Fund and/or the Independent Directors of the Fund, as appropriate, to
do any of the following:
negotiateor enter into any agreement on the Fund's behalf with
any business concern doing or seeking to do business with the
Fund if you, or a person related to you, has a substantial
interest in the business concern; give or receive a gift in
excess of $100 per year per company that does business or is
attempting to do business with the Fund; enter into an agreement,
negotiate or otherwise do business on the Fund's behalf with a
personal friend or a person related to you; OR serve on the board
of directors of, or act as consultant to, any publicly traded
corporation.
B. Independent Director
If you are an Independent Director, you cannot serve as officer of,
director of, employee of; OR consultant to any corporation or other
business entity which
engages in an activity in competition with the Fund; OR
which is engaged in any activity that would create a conflict of
interest with your duties unless you receive approval of the
other Independent Directors. These prohibitions also apply to
anyone who lives in the same household with you.
IX. What happens if you violate the rules in the Code of Ethics?
You may be subject to serious penalties.
A. The penalties which may be imposed include:
formal warning; restriction of trading privileges; disgorgement
of trading profits; fine; AND/OR suspension or termination of
employment.
B. Penalty Factors
The factors which may be considered when determining the appropriate
penalty include, but are not limited to:
the harm to the interests of the Portfolios and/or shareholders;
the extent of unjust enrichment; the frequency of occurrence; the
degree to which there is personal benefit from unique knowledge
obtained through employment with Jones & Babson; the degree of
perception of a conflict of interest; evidence of fraud,
violation of law, or reckless disregard of a regulatory
requirement; AND/OR the level of accurate, honest and timely
cooperation from the person subject to the Code of Ethics. If you
have any questions about the Code of Ethics, do not hesitate to
ask a member of management or Compliance.
X. Annual Certification of Compliance with the Code
As a condition of your employment, you will be asked to certify annually:
that you have read this Code of Ethics; that you understand
this Code of Ethics; AND that you have complied with this
Code of Ethics.
XI. Regular Reporting to Fund Directors
The management of Jones & Babson and the Fund will prepare a report at
least annually to the Board of Directors of the Fund of any violation of
this Code of Ethics requiring significant sanctions and a report
outlining the results of any sub-adviser or affiliate Code of Ethics
monitoring activity.
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Code of Ethics
APPENDIX 1: DEFINITIONS
1. "Beneficial Ownership"
See "Appendix 2: What is Beneficial Ownership?".
2. "Code-Exempt Security"
A "code-exempt security" is a security in which you may invest without
preclearing or reporting such transactions with Jones & Babson. The list
of Code-Exempt Securities appears in Appendix 3.
3. "Initial Public Offering"
"Initial public offering" means an offering of securities for which a
registration statement has not previously been filed with the SEC and for
which there is no active public market in the shares.
4. "Private Placement"
"Private placement" means an offering of securities in which the issuer
relies on an exemption from the registration provisions of the federal
securities laws, and usually involves a limited number of sophisticated
investors and a restriction on resale of the securities.
5. "Security"
A "security" includes a great number of different investment vehicles.
However, for purposes of this Code of Ethics, "security" includes any of
the following:
note, stock, treasury stock, bond, debenture, evidence of
indebtedness, certificate of interest or participation in any
profit-sharing agreement, collateral-trust certificate,
preorganization certificate or subscription, transferable share,
investment contract, voting-trust certificate, certificate of deposit
for a security, fractional undivided interest in oil, gas or other
mineral rights, any put, call, straddle, option, or privilege on any
security (including a certificate of deposit) or on any group or index
of securities (including any interest therein or based on the value
thereof), or any put, call, straddle, option, or privilege entered
into on a national securities exchange relating to foreign currency,
or in general, any interest or instrument commonly known as a
"security," or any certificate of interest or participation in,
temporary or interim certificate for, receipt for, guarantee of,
future on or warrant or right to subscribe to or purchase, any of the
foregoing.
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Appendix 2 - Page 2
APPENDIX 2: WHAT IS "BENEFICIAL OWNERSHIP"?
1. Are securities held by family members "beneficially owned" by me?
Probably. As a general rule, you are regarded as the beneficial owner
of securities held in the name of
your spouse;
your minor children;
a relative who shares your home; OR
any other person IF:
You obtain from such securities benefits substantially similar to
those of ownership. For example, if you receive or benefit from
some of the income from the securities held by your spouse, you
are the beneficial owner; OR
You can obtain title to the securities now or in the future.
2. Are securities held by a company I own also "beneficially owned" by me?
Probably not. Owning the securities of a company does not mean you
"beneficially own" the securities that the company itself owns. However,
you will be deemed to "beneficially own" these securities if:
The company is merely a medium through which you (by yourself or
with others) in a small group invest or trade in securities; AND
The company has no other substantial business.
In such cases, you and those who are in a position to control the company
will be deemed to "beneficially own" the securities owned by the company.
3. Are securities held in trust "beneficially owned" by me?
Maybe. You are deemed to "beneficially own" securities held in trust
if any of the following is true:
You are a trustee and either you or members of your immediate
family have a vested interest in the income or corpus of the
trust; You have a vested beneficial interest in the trust; OR You
are settlor of the trust and you have the power to revoke the
trust without obtaining the consent of all the beneficiaries.
As used in this section, the "immediate family" of a trustee
means:
A son or daughter of the trustee, or a descendent of either; A
stepson or stepdaughter of the trustee; The father or mother of
the trustee, or an ancestor of either; A stepfather or stepmother
of the trustee; and A spouse of the trustee. For the purpose of
determining whether any of the foregoing relationships exists, a
legally adopted child of a person is considered a child of such
person by blood.
4. Are securities in pension or retirement plans "beneficially owned" by me?
Probably not. Beneficial ownership does not include indirect interest by
any person in portfolio securities held by a pension or retirement plan
holding securities of an issuer whose employees generally are the
beneficiaries of the plan. However, your participation in a pension or
retirement plan is considered beneficial ownership of the portfolio
securities if you can withdraw and trade the securities without
withdrawing from the plan.
5. Examples of Beneficial Ownership
Securities Held by Family Members
Example 1: Tom and Mary are married. Although Mary has an independent
source of income from a family inheritance and segregates her funds
from those of her husband, Mary contributes to the maintenance of the
family home. Tom and Mary have engaged in joint estate planning and
have the same financial adviser. Since Tom and Mary's resources are
clearly significantly directed towards their common property, they
shall be deemed to be the beneficial owners of each other's
securities.
Example 2: Mike's adult son David lives in Mike's home. David is
self-supporting and contributes to household expenses. Mike is a
beneficial owner of David's securities.
Example 3: Joe's mother Margaret lives alone and is financially
independent. Joe has power of attorney over his mother's estate, pays
all her bills and manages her investment affairs. Joe borrows freely
from Margaret without being required to pay back funds with interest,
if at all. Joe takes out personal loans from Margaret's bank in
Margaret's name, the interest from such loans being paid from
Margaret's account. Joe is a significant heir of Margaret's estate.
Joe is a beneficial owner of Margaret's estate. Securities Held by a
Company
Example 4: ABC is a holding company with five shareholders owning
equal shares in the company. Although ABC Company does no business on
its own, it has several wholly-owned subsidiaries which invest in
securities. Stan is a shareholder of ABC Company. Stan has a
beneficial interest in the securities owned by ABC Company's
subsidiaries. Securities Held in Trust
Example 5: John is trustee of a trust created for his two minor
children. When both of John's children reach 21, each shall receive an
equal share of the corpus of the trust. John is a beneficial owner of
the trust.
Example 6: Jane is trustee of an irrevocable trust for her daughter.
Jane is a director of the issuer of the equity securities held by the
trust. The daughter is entitled to the income of the trust until she
is 25 years old, and is then entitled to the corpus. If the daughter
dies before reaching 25, Jane is entitled to the corpus. Jane is a
beneficial owner of the trust.
Example 7: Tom's spouse is the beneficiary of an irrevocable trust
managed by a third party investment adviser. Tom is a beneficial owner
of the trust.
APPENDIX 3: CODE-EXEMPT SECURITIES
Because they do not pose a possibility for abuse, some securities are exempt
from this Code of Ethics. The following is the current list of "Code-Exempt
Securities":
Mutual funds (open-end funds)
Bank Certificates of Deposit
U.S. government securities (such as Treasury notes, etc.)
Securities which are acquired through an employer-sponsored automatic
payroll deduction plan
securities purchased through dividend reinvestment programs
commercial paper;
bankers acceptances; AND
Futures contracts (and option contracts) on the following:
Standard & Poor's 500 Index; or
Standard & Poor's 100 Index
We may modify this list of securities at any time, please send a written request
to Jones & Babson, Inc. to request the most current list.
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Appendix 4--Page 1
APPENDIX 4: HOW DOES THE PRECLEARANCE PROCESS WORK?
After requesting pre-clearance from the compliance officer, your request is then
subjected to the following test.
Step 1: Blackout Test
Is the security in question on the relevant Access Person, Investment
or Portfolio Person blackout list?
If "YES", the system will send a message to you to DENY the personal trade
request.
If "NO", then your request will be approved by the compliance officer.
The preclearance process can be changed at any time to ensure that the goals of
the Advisors' Code of Ethics are advanced.
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SCHEDULE A
INVESTMENT ADVISER:
JONES & BABSON, INC.
THE FUND AND ITS PORTFOLIOS:
J&B FUNDS
J&B INTERNATIONAL SMALL-CAP GROWTH FUND
J&B SMALL-CAP AGGRESSIVE GROWTH FUND
J&B MID-CAP AGGRESSIVE GROWTH FUND
ACKNOWLEDGMENT OF CODE OF ETHICS
I have read the Code of Ethics and agree to comply with its provisions.
Print Name
Signature Date
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1 Rule 17j-1 under the Investment Company Act of 1940 and Rules 204-2 and
204a under the Investment Advisers Act of 1940 serve as a basis for much of
what is contained in this Code of Ethics.
2 How does J&B determine whether to approve or deny your preclearance
request? See Appendix 4 for a description of the process. 3 If you are the
compliance officer, you must receive your approval from the President.
