CODE OF ETHICS
Threshold Advisor Funds, Inc.
Kennedy Capital Management, Inc.
September 1, 2000
I. INTRODUCTION
A. Purpose. In order to ensure that personnel associated with the
Threshold Advisor Funds, Inc. (the "Fund") and the Fund's adviser, Kennedy
Capital Management, Inc. (the "Adviser") comply with the requirements of Section
17(j) of the Investment Company Act of 1940 ("1940 Act") and Rule 17j-1
thereunder, the Fund and the Adviser each have adopted this Code of Ethics
("Code").
B. Fiduciary Duty. This Code is based on the principle that Access
Persons (as defined below) of the Fund owe a fiduciary duty to, among others,
shareholders of the Fund. In complying with this fiduciary duty, Access Persons
owe shareholders the highest duty of trust and fair dealing. The Code applies to
all Access Persons and focuses principally on reporting of personal securities
transactions. Access Persons must avoid activities, interests and relationships
that might interfere with making decisions in the best interests of the Fund and
its shareholders.
As fiduciaries, Access Persons must at all times: (1) place the
interests of the Fund first; (2) avoid taking inappropriate advantage of their
positions; and (3) conduct all personal securities transactions in full
compliance with this Code. Doubtful situations should be resolved in favor of
the Fund. Technical compliance with the Code's procedures will not automatically
insulate from scrutiny any trades that indicate an abuse of fiduciary duties.
II. DEFINITIONS
A. "Access Person" means: (1) any officer or director of the Fund; (2)
any officer or director of the Adviser; or (2) any Advisory Person (defined
below). A list of current Access Persons is attached hereto as Appendix A.
B. "Advisory Person" means (1) any employee of the Adviser or of any
company in a control relationship to the Adviser who, in connection with his or
her regular functions or duties, makes, participates in or obtains information
regarding the purchase or sale of a Security by the Fund, or whose functions
relate to the making of any recommendations with respect to such purchases or
sales; and (2) any natural person in a control relationship to the Adviser who
obtains information concerning recommendations made to the Fund with regard to
the purchase or sale of a Security.
Note: A person who normally only assists in the preparation of public
reports, or receives public reports but receives no information about current
recommendations or trading, is neither an Advisory Person nor an Access Person.
A single instance or infrequent, inadvertent instances of obtaining knowledge
does not make one either then or for all times an Advisory Person. Under the
definition of "Advisory Person" the phrase "makes. . .the purchase or sale"
means someone who places orders or otherwise arranges transactions. An Advisory
Person or Access Person of the Fund does not include an employee, director or
officer of any subadviser or administrator to the Fund where such company has
adopted pursuant to Section VIII hereof a code of ethics satisfactory to the
Board of Directors of the Fund which contains provisions reasonably necessary to
prevent its Advisory Persons from engaging in any act, practice or course of
business prohibited by Rule 17j-1(a) under the 1940 Act and such employee is
required to report his transactions to such company.
C. "Beneficial Ownership" will be attributed to an Access Person in all
instances in which the Access Person (i) possesses the ability to purchase or
sell the securities (or the ability to direct the disposition of the
securities); (ii) possesses voting power (including the power to vote or to
direct the voting over such securities; or (iii) receives any benefits
substantially equivalent to those of ownership. Whether a person has beneficial
ownership will be resolved in accordance with, and this definition shall be
subject to, the definition of "beneficial owner" found in Rules 16a-1(a)(2) and
(5) under the Securities Exchange Act of 1934.
D. "Control" shall have the same meaning as that set forth in Section
2(a)(9) of the 1940 Act. Section 2(a)(9) provides that "control" means the power
to exercise a controlling influence over the management or policies of a
company, unless such power is solely the result of an official position with
such company.
E. "Independent Director" means a Director of the Fund who is not an
"interested person" of the Fund within the meaning of Section 2(a)(19) of the
1940 Act.
F. "Portfolio Manager" means a person who has or shares principal
day-to-day responsibility for managing the portfolio of the Fund.
G. "Security" includes stock, notes, bonds, debentures, and other
evidences of indebtedness (including loan participations and assignments),
limited partnership interests, investment contracts, and all derivative
instruments of the foregoing, such as options and warrants; except that it does
not include securities issued by the U.S. Government, short-term debt securities
which are "government securities" within the meaning of Section 2(a)(16) of the
1940 Act, equity securities that are not eligible for purchase or sale by the
Fund, shares of registered open-end investment companies, bankers' acceptances,
bank certificates of deposit, commercial paper and other money market
instruments, or such other securities as may be excepted under the provisions of
Rule 17j-1 under the 1940 Act as in effect from time to time. "Security" does
not include futures or options on futures, but the purchase and sale of such
instruments are nevertheless subject to the reporting requirements of the Code.
H. "Security Held or to be Acquired by the Fund" means: (i) any
Security which, in the most recent 15 days, (a) is or has been held by the Fund;
or (b) is being considered by the Fund or the Adviser for purchase or sale by
the Fund; and (ii) any option to purchase or sell, and any security convertible
into, a Security described in Section II.H(i) above.
III. EXEMPT TRANSACTIONS
The prohibitions of Section IV of this Code shall not apply to the following
transactions by Access Persons:
(1) Mutual Funds. Purchases and sales of mutual funds (including the Fund);
(2) No Control. Purchases and sales of Securities effected for any account
over which the Access Person has no direct or indirect influence or
control; and purchases and sales which are nonvolitional on the part of
either the Access Person or the Fund, including purchase or sales upon
exercise of puts or calls written by the Access Person and sales from a
margin account pursuant to a bona fide margin call.
(3) 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; and any purchases which are: (i) made
solely with the dividend proceeds received in a dividend reinvestment
plan; or (ii) part of an automatic payroll deduction plan whereby an
employee purchases securities issued by an employer;
(4) 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, to the extent the rights were acquired in the issue, and
the sale of such rights so acquired; and
(5) No Harm to the Fund. Transactions that appear to present no reasonable
likelihood of harm to the Fund, which are otherwise in accordance with
Rule 17j-1 under the 1940 Act, and which the President of the Fund has
authorized in advance; and transactions that the Independent Directors
of the Fund, after consideration of all of the facts and circumstances,
determined to have not been fraudulent, deceptive or manipulative to
the Fund.
IV. PROHIBITED TRANSACTIONS
A. No Access Persons shall, in connection with the purchase or sale,
directly or indirectly, by such person of a Security Held or to be Acquired by
the Fund:
(1) employ any device, scheme or artifice to defraud the Fund;
(2) make to the Fund any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statement made, in
light of the circumstances under which they are made, not misleading;
(3) engage in any act, practice or course of business which operates or
would operate as a fraud or deceit upon the Fund;
(4) engage in any manipulative practice with respect to the Fund;
(5) engage in any illegal transaction in a Security while in possession of
material, nonpublic information regarding the Security or the issuer of
the Security; or
(6) engage in any transactions intended to raise, lower, or maintain the
price of any Security or to create a false appearance of active
trading.
B. Subject to the exceptions stated in Section III of this Code, it
shall be impermissible for any Access Person to purchase or sell, directly or
indirectly, any Security (or any option to purchase any Security) which:
(1) is being considered for purchase or sale by the Fund; or
(2) has been purchased or sold by the Fund within the most recent 10 days.
A Security is "being considered for purchase or sale"
(a) for a period of three business days after a written recommendation to
purchase or sell a security has been made,
(b) with respect to a portfolio manager or persons advising a portfolio
manager with respect to a specific transaction, during the period a
portfolio manager is making a determination regarding the purchase or
sale of a security or
(c) with respect to the person making the recommendation, when such person
seriously considers making such a recommendation.
A Security is being "purchased" or "sold" by the Fund from the time
when a purchase or sale program has been communicated to the person who places
the buy and sell orders for the Fund until the time when such program has been
fully completed or terminated.
C. Subject to the exceptions stated in Section III of this Code, it
shall be impermissible for any Access Person to liquidate or cover a position in
any Security held by the Access Person within 60 calendar days of the date on
which such position was initiated by the Access Person; provided, however, that
such a transaction will be permissible with the prior approval of the Compliance
Officer of the Fund or the President of the Adviser. Permission may be granted
in the sole discretion of the Compliance Officer or President if:
(1) a change in the market value of the of the Security to be
liquidated or covered has resulted in a loss of more than 15%
of the initial market value of such Security; or
(2) exceptional circumstances warrant approval of the transaction
and the transaction does not disadvantage the Fund.
D. Investment Personnel must obtain approval from the Fund or the
Adviser before directly or indirectly acquiring beneficial ownership in any
Securities in an initial public offering ("IPO") or limited offering. A limited
offering is an offering exempt from registration under the Securities Act of
1933 pursuant to Section 4(2) or section 4(6) thereof, including any offering
conducted on a private placement basis pursuant to Regulation D of the
Securities Act.
E. Any Access Person who questions whether a contemplated transaction
is prohibited by this Code should discuss the transaction with the Compliance
Officer of the Fund or the President of the Adviser prior to proceeding with the
transaction.
V. REPORTING REQUIREMENTS
A. Initial Reporting Requirements (Access Persons). No later than 10
days after a person becomes an Access Person, every Access Person (except
Independent Directors) shall file with the President of the Fund a report
containing the information set forth in V.C below with respect to transactions
in any Security in which such Access Person has, or by reason of such
transaction acquires, any direct or indirect beneficial ownership in the
Security (regardless of whether such transaction is listed in Section III);
provided, however, that such Access Person shall not be required to make a
report with respect to transactions effected for any account over which such
person does not have any direct or indirect influence or control if such person
certifies such fact to the Fund, provided further, that the term "Security" does
not include the savings or demand deposit accounts with banks.
B. Reporting Requirements (Independent Directors). Each Independent
Director must report to the President of the Fund any trade in a Security over
which any Independent Director has Beneficial Ownership if the Independent
Director knew or, in the ordinary course of fulfilling his or her duty as a
director of the Fund, should have known, that during the 15-day period
immediately preceding or after the date of the transaction in a Security by the
director such Security was or would be purchased or sold by the Fund or such
purchase or sale by the Fund was or would be considered by the Adviser for the
Fund. The "should have known" standard does not imply a duty of inquiry and no
knowledge is imputed to the director because of prior knowledge of the Fund's
portfolio holdings, investment objective, policies or restrictions.
C. Quarterly Reporting Requirements. Every Access Person (except
Independent Directors) must report all personal Securities transactions to the
President of the Fund no later than ten (10) days after the end of the calendar
quarter in which the transaction took place. This report shall include the date,
the title and number of shares, principal amount, nature of the transactions
(purchase or sale), price and the name of the brokerage firm or bank through
whom the Securities transactions was effected. A copy of the form of Quarterly
Report is attached hereto as Appendix B.
D. Annual Reporting Requirements (Access Persons). At the end of each
year, every Access Person (except Independent Directors) must report all
personal Securities transactions to the President of the Fund (which information
must be current as of a date no more than 30 days before the report is
submitted). This report shall include the date, the title and number of shares,
principal amount, nature of the transactions (purchase or sale), price and the
name of the brokerage firm or bank through whom the Securities transactions was
effected.
E. Report Must be Filed Even if No Transactions. If an Access Person is
not required to file such a report for any quarter because no reportable
transactions were effected by such Access Person or because any transaction
effected by such Access Person was for an account over which he or she has no
direct or indirect influence or control, such Access Person (other than an
Independent Director of the Fund) shall certify these facts to the Fund within
ten (10) days of the end of such calendar quarter.
F. Annual Report to Board of Directors. At least annually, the Fund and
the Adviser must furnish to the Board a written report that:
1. Describes any issues arising under the Code of Ethics since
the last report to the Board, including, but not limited to,
information about material violations of the code or
procedures and sanctions imposed as a result;
2. Certifies that the Fund or the Adviser, as applicable, has
adopted procedures reasonably necessary to prevent Access
Persons from violating the Code.
G. No Admission. The making of such report shall not be construed as an
admission by the person making such report that he or she has any direct or
indirect beneficial ownership in the Security to which the report relates, and
the existence of any report shall not be construed as an admission that any
event reported on constitutes a violation of Section V. hereof.
VI. CONFIDENTIALITY
Access Persons are prohibited from revealing information relating to
the investment intentions, activities or portfolios of the Fund except to
persons whose responsibilities require knowledge of the information. A Portfolio
Manager shall maintain all information relating to his or her portfolio
management in a confidential and secure manner.
VII. REVIEW AND ENFORCEMENT
A. Transaction Review.
1. Review. The Compliance Officer of the Fund shall cause the
reported personal Securities transactions to be compared with
completed and contemplated portfolio transactions of the Fund
to determine whether any transactions (each a "Reviewable
Transaction") listed in Section IV may have occurred.
2. Code of Ethics Review Committee. If the Compliance Officer of
the Fund determines that a Reviewable Transaction may have
occurred, the Code of Ethics Review Committee shall then
determine whether a violation of this Code may have occurred,
taking into account all the exemptions provided under Section
III. Before making any determination that a violation has been
committed by an individual, the Committee shall give such
person an opportunity to supply additional information
regarding the transaction in question. The Committee is
responsible for investigating any suspected violation of the
Code and imposing sanctions.
3. Committee Membership, Voting and Quorum. The Code of Ethics
Review Committee shall consist of Charles W. Schweizer,
President of the Fund, and Frank G. Grelle and James T.
Little, each an Independent Director of the Fund. The
Committee shall vote by majority vote with two members serving
as a quorum. Vacancies may be filled and, in the case of
extended absences or periods of unavailability, alternates may
be selected, by a majority vote of the remaining members of
the Committee.
B. Remedies
1. Sanctions. If the Code of Ethics Review Committee determines
that an Access Person has committed a violation of the Code,
the Committee may impose sanctions and take other actions as
it deems appropriate, including a letter of caution or
warning, suspension of personal trading rights, suspension of
employment (with or without compensation), fine, and
termination of the employment of the violator. The Code of
Ethics Review Committee may also require the Access Person to
reverse the trade(s) in question and forfeit to the Fund any
profit or absorb any loss derived therefrom.
2. No person shall participate in a determination of whether he
or she has committed a violation of this Code or in the
imposition of any sanction against himself or herself. If a
Securities transaction of the Compliance Officer of the Fund
is under consideration, a Director or other officer of the
Fund designated for the purpose by the vote of the Directors
of the Fund, shall act in all respects in the manner
prescribed herein for the Compliance Officer of the Fund.
C. Implementation of Code; Inquiries Regarding the Code. The President of
the Fund is responsible for implementation of this Code and will answer
any questions about this Code or any other compliance-related matters.
VIII. Alternate Code of Ethics
A. Any subadviser or administrator to the Fund shall be bound by the
requirements of this Code of Ethics of the Fund; except that each may:
1. Submit to the Board of Directors of the Fund a copy of a Code
of Ethics adopted by such entity pursuant to Rule 17j-1 under
the 1940 Act and satisfactory to the Fund, along with a letter
of certification that such entity has adopted procedures
reasonably necessary to prevent Access Persons from violating
the Code of Ethics;
2. Promptly report to the Fund in writing any material amendments
to such Code; and
3. Provide to the Board, at least annually, the report required
in Article V.F.
B. In the event any subadviser or administrator submits a Code of Ethics
which it has adopted and is satisfactory to the Fund, such party shall:
1. Promptly furnish the Fund upon request at any time and from
time to time copies of any reports made pursuant to such Code
by any person who would, except for the provisions of the
final paragraph of Section I.A hereof, be defined as an Access
Person as to the Fund; and
2. Immediately furnish to the Fund, without request, all material
information regarding any violation of such Code by any person
who would, except for the provisions of the final paragraph of
Section I.A hereof, be defined as an Advisory Person or Access
Person as to the Fund.
IX. Records
A. The Fund shall maintain records in the manner and to the extent set
forth below, which records may be maintained on microfilm under the conditions
described in Rule 31a-2(f)(1) under the 1940 Act and shall be available for
appropriate examination by representatives of the Securities and Exchange
Commission.
1. A copy of this Code and any other Code of Ethics which is, or
at any time within the past five years has been, in effect
shall be preserved in an easily accessible place.
2. A record of any violation of this Code and of any action taken
as a result of such violation shall be preserved 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.
3. A copy of each report made pursuant to this Code by any Access
Person shall be preserved by the Fund for a period of not less
than five years from the end of the fiscal year in which it is
made, the first two years in an easily accessible place.
4. A list of all persons who are, or within the past five years
have been, required to make reports pursuant to this Code
shall be maintained in an easily accessible place.
B. Confidentiality
All reports of Securities transactions and any other information filed
with the Fund pursuant to this Code shall be treated as confidential, except as
regards appropriate examinations by representatives of the Securities and
Exchange Commission.
X. Amendment: Interpretation of Provisions
The Board of Directors may from time to time amend this Code or adopt
such interpretations of this Code as they deem appropriate.
Appendix A
PERSONS SUBJECT TO THIS CODE OF ETHICS
1. Portfolio Managers: Frank Latuda, Timothy Hasara and Richard
Eckenrodt
2. Advisory Personnel:
FULL-TIME EMPLOYEES
11/30/00
1. Anderson, Richard E.
2. Arbogast III, Linn J.
3. Bryant, Charles L.
4. Cribbs, Charlotte
5. Dickherber, Mark
6. Dorris, Keith M.
7. Dowdy, David Scott
8. Eckenrodt, Richard
9. Galeski, Michelle
10. Godfrey, Sheila
11. Hasara, Timothy P.
12. Herbst, Victoria
13. Hughes, Shelagh
14. Hunt, Doris A.
15. Jermak, Matthew J.
16. Karpinski, Wayne A.
17. Kaufmann, Delores A.
18. Latuda Jr., Frank
19. Laux, John
20. Miller, Mark
21. Oliver, Richard E.
22. Ostrec, Mirella
23. Raterman, Terrence G.
24. Rogan, Patrick
25. Row, Patricia A.
26. Schweizer, Charles W.
27. Sinise, Richard H.
28. Spies, Pamela M.
29. Spurgeon, Jean A.
30. Todaro, Richard L.
31. Tow, Cathleen
32. Tow III, Willard F.
33. Werner, Michael B.
34. Woods, Daniel L.
35. Yarbrough, Brian P.
36. Zinselmeier, Vicky L.
PART-TIME EMPLOYEES
1. Tiffany Pohl
2. Jacqueline Gerner
3. Officers and Non-Independent Directors of the Fund: Charles W.
Schweizer, Timothy Hasara and Richard Exkenrodt
4. Officers and Non-Independent Directors of the Adviser:Charles
Schweizer, Richard Anderson, Patricia Row, Richard Oliver and
Richard Sinise
5. Independent Directors of the Fund: Frank G. Grele and James T.
Little
Pursuant to Section VIII of this Agreement, the Fund's Board of
Directors has determined that these employees of Unified Fund Services,
Inc., the Fund's administrator (the "Administrator"), shall be subject
to the Administrator's Code of Ethics adopted pursuant to Rule 17j-1
under the Investment Company Act of 1940, as amended. The Administrator
has undertaken to promptly report to the Fund in writing any material
violations of its Code by its employees.
At least annually, the Administrator must furnish to the Board a
written report that: (1) describes any issues arising under the Code of
Ethics since the last report to the Board, including, but not limited
to, information about material violations of the Code or procedures and
sanctions imposed as a result; and (2) certifies that the Administrator
has adopted procedures reasonably necessary to prevent Access Persons
from violating the Code.
Dated: December 7, 2000
Appendix B
THRESHOLD ADVISOR FUNDS, INC.
KENNEDY CAPITAL MANAGEMENT, INC.
RE: PERSONAL SECURITIES TRANSACTION STATEMENT
FOR THE QUARTER ENDED: ___________ ___, _______
Please check the appropriate statement:
----- I have not purchased or sold any securities, futures or options or
securities during the above-referenced quarter, excluding mutual funds
and U.S. Government securities (collectively, "Personal Transactions")
----- Attached are copies of all my statements of accounts and trade
confirmations for Personal Transactions that occurred during the
above-referenced quarter.
----- I have directed my broker-dealer to forward duplicate confirmations and
account statements for Personal Transactions that occurred during the
above-referenced quarter.
Print Name:
Title:
Signature
Date
