GOVERNMENT SECURITIES DELAWARE, LLC
CODE OF ETHICS
SECTION 1 - BACKGROUND
This Code of Ethics is adopted under Rule 17j-1 under the Investment Company Act
of 1940 ("1940 Act") and has been approved by the Board of Managers of
Government Securities Delaware, LLC (the "Fund"). Except where noted, the Code
applies to all Fund employees.
Section 17(j) under the Investment Company Act of 1940 makes it unlawful for
persons affiliated with investment companies, their principal underwriters or
their investment advisers to engage in fraudulent personal securities
transactions. Rule 17j-1 requires each Fund, investment adviser and principal
underwriter to adopt a Code of Ethics that contains provisions reasonably
necessary to prevent an employee from engaging in conduct prohibited by the
principles of the Rule. The Rule also requires that reasonable diligence be used
and procedures be instituted which are reasonably necessary to prevent
violations of the Code of Ethics.
On August 23, 1999, the SEC adopted amendments to Rule 17j-1 which require
greater board oversight of personal trading practices, more complete reporting
of employee securities trading and preclearance of employee purchases of initial
public offerings and private placements. The amendments require, among other
things, that the Fund provide its Board of Managers annually a written report
that (i) describes issues that arose during the previous year under the Code,
including information about material code violations and sanctions imposed and
(ii) certifies to the Board that the Fund has adopted procedures reasonably
necessary to prevent access persons from violating the Code.
SECTION 2 - STATEMENT OF GENERAL FIDUCIARY PRINCIPLES
The Code of Ethics is based on the fundamental principle that the Fund and its
employees must put client interests first. Among the Fund 's fiduciary
responsibilities is the responsibility to ensure that its employees conduct
their personal securities transactions in a manner which does not take unfair
advantage of their relationship to the Fund. All the Fund employees must adhere
to this fundamental principle as well as comply with the specific provisions set
forth herein. It bears emphasis that technical compliance with these provisions
will not insulate from scrutiny transactions which show a pattern of compromise
or abuse of an employee's fiduciary responsibilities to the Fund. Accordingly,
all Fund employees must seek to avoid any actual or potential conflicts between
their personal interest and the interest of the Fund. In sum, all Fund employees
shall place the interest of the Fund before personal interests.
SECTION 3 - INSIDER TRADING POLICY
All Fund employees are prohibited from buying or selling any security while in
the possession of material nonpublic information about the issuer of the
security. Fund employees are also prohibited from communicating to third parties
any material nonpublic information about any security or issuer of securities.
Additionally, no Fund employee may use inside information about the Fund's
activities to gain personal benefit.
SECTION 4 - RESTRICTIONS RELATING TO SECURITIES TRANSACTIONS
A. GENERAL TRADING RESTRICTIONS FOR ALL EMPLOYEES
The following restrictions apply to all Fund employees:
1. ACCOUNTS INCLUDE FAMILY MEMBERS AND OTHER ACCOUNTS. Accounts of employees
include the accounts of their spouses, dependent relatives, trustee and
custodial accounts or any other account in which the employee has a financial
interest or over which the employee has investment discretion (other than the
Fund -).
2. PRECLEARANCE. All employees must obtain approval from the Compliance Director
or preclearance delegatee prior to entering any securities transaction (with the
exception of exempted securities as listed in Section 5) in all
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accounts. Approval of a transaction, once given, is effective only for the
business day on which approval was requested or until the employee discovers
that the information provided at the time the transaction was approved is no
longer accurate. If an employee decides not to execute the transaction on the
day preclearance approval is given, or the entire trade is not executed, the
employee must request preclearance again at such time as the employee decides to
execute the trade.
Employees may preclear trades only in cases where they have a present intention
to transact in the security for which preclearance is sought. It is the Fund 's
view that it is not appropriate for an employee to obtain a general or
open-ended preclearance to cover the eventuality that he or she may buy or sell
a security at some point on a particular day depending upon market developments.
This requirement would not prohibit a price limit order, provided that the
employee shall have a present intention to effect a transaction at such price.
Consistent with the foregoing, an employee may not simultaneously request
preclearance to buy and sell the same security.
3. RESTRICTIONS ON PURCHASES. No employee may purchase any security which at
the time is being purchased, or to the employee's knowledge is being considered
for purchase, by the Fund.
4. RESTRICTIONS ON SALES. No employee may sell any security which at the time is
actually being sold, or to the employee's knowledge is being considered for
sale, by the Fund.
5. RESTRICTIONS ON RELATED SECURITIES. The restrictions and procedures
applicable to the transactions in securities by employees set forth in this Code
of Ethics shall similarly apply to securities that are issued by the same issuer
and whose value or return is related, in whole or in part, to the value or
return of the security purchased or sold or being contemplated for purchase or
sale during the relevant period by the Fund. For example, options or warrants to
purchase common stock, and convertible debt and convertible preferred stock of a
particular issuer would be considered related to the underlying common stock of
that issuer for purposes of this policy. In sum, the related security would be
treated as if it were the underlying security for the purpose of the
pre-clearance procedures described herein.
6. PRIVATE PLACEMENTS. Employee purchases and sales of "private placement"
securities (including all private equity partnerships, hedge funds, limited
partnership or venture capital funds) must be precleared directly with the
Compliance Director or designee. No employee may engage in any such transaction
unless the Compliance Director or his designee and the employee's senior manager
have each previously determined in writing that the contemplated investment does
not involve any potential for conflict with the investment activities of the
Fund.
If, after receiving the required approval, an employee has any material role in
the subsequent consideration by any Fund of an investment in the same or
affiliated issuer, the employee must disclose his or her interest in the private
placement investment to the Compliance Director and the employee's department
head. The decision to purchase securities of the issuer by a Fund must be
independently reviewed and authorized by the employee's department head.
7. INITIAL PUBLIC OFFERINGS. As set forth in Paragraph A.2. of this Section 4,
the purchase by an employee of securities offered in an initial public offering
must be precleared. As a matter of policy, employees will not be allowed to
participate in so-called "hot" offerings as such term may be defined by
appropriate regulators (e.g., offerings that are oversubscribed or for which the
demand is such that there is the possibility of oversubscription).
B. ADDITIONAL TRADING RESTRICTIONS FOR INVESTMENT PERSONNEL
The following additional restrictions apply to investment personnel. Investment
personnel are persons who, in connection with their regular functions or duties,
make or participate in making recommendations regarding the purchase or sale of
securities by the Fund). The Compliance Department will retain a current a list
of investment personnel.
1. NOTIFICATION. An investment person must notify the Compliance Department or
preclearance designee of any intended transactions in a security for his or her
own personal account or related accounts which is owned or contemplated for
purchase or sale by the Fund.
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2. BLACKOUT PERIODS. An investment person may not buy or sell a security within
7 CALENDAR DAYS either before or after a purchase or sale of the same or related
security by the Fund. For example, if the Fund trades a security on day 0, day 8
is the first day the manager, analyst or portfolio management group member of
the Fund may trade the security for his or her own account. An investment
person's personal trade, however, shall have no affect on the Fund's ability to
trade. For example, if within the seven-day period following his or her personal
trade, an investment person believes that it is in the best interests of the
Fund for which he or she has investment authority to purchase or sell the same
security on behalf of the Fund, the trade should be done for the Fund, and an
explanation of the circumstances must be provided to the Compliance Department.
3. ESTABLISHING POSITIONS COUNTER TO FUND POSITIONS. No investment person may
establish a long position in his or her personal account in a security if the
Fund for which he or she has investment authority maintains a position that
would benefit from a decrease in the value of such security. For example, the
investment person would be prohibited from establishing a long position if (1)
the Fund holds a put option on such security (aside from a put purchased for
hedging purposes where the fund holdings the underlying security); (2) the Fund
has written a call option on such security; or (3) the Fund has sold such
security short, other than "against-the-box."
No investment person may purchase a put option or write a call option where the
Fund holds a long position in the underlying security.
No investment person may short sell any security where the Fund holds a long
position in the same security or where the Fund otherwise maintains a position
in respect of which the Fund would benefit from an increase in the value of the
security.
4. PURCHASING AN INVESTMENT FOR THE FUND THAT IS A PERSONAL HOLDING. An
investment person may not purchase an investment for the Fund that is also a
personal holding of the investment person or any other account covered by this
Code of Ethics, or the value of which is materially linked to a personal
holding, unless the investment person has obtained prior approval from his or
her senior manager.
5. PROHIBITION ON SHORT-TERM PROFITS. Investment personnel are prohibited from
profiting on any sale and subsequent purchase, or any purchase and subsequent
sale of the same (or equivalent) securities occurring within 60 calendars days
("short-term profit"). This holding period also applies to all permitted options
transactions; therefore, for example, an investment person may not purchase or
write an option if the option will expire in less than 60 days (unless such a
person is buying or writing an option on a security that he or she has held more
than 60 days). In determining short-term profits, all transactions within a
60-day period in all accounts related to the investment person will be taken
into consideration in determining short-term profits, regardless of his or her
intentions to do otherwise (e.g., tax or other trading strategies). Should an
investment person fail to preclear a trade that results in a short-term profit,
the trade would be subject to reversal with all costs and expenses related to
the trade borne by the investment person, and he or she would be required to
disgorge the profit. Transactions not required to be precleared under Section 5
will not be subject to this prohibition.
C. TRADING RESTRICTIONS FOR DISINTERESTED DIRECTORS OF THE FUND
The following restrictions apply only to disinterested directors of the
Fund (i.e., any director who is not an "interested person" of the Fund within
the meaning of Section 2(a)(10) of the 1940 Act):
1. RESTRICTIONS ON PURCHASES. No disinterested director may purchase any
security which, to the director's knowledge at the time, is being purchased or
is being considered for purchase the Fund.
2. RESTRICTIONS ON SALES. No disinterested director may sell any security which,
to the director's knowledge at the time, is being sold or is being considered
for sale by the Fund.
3. RESTRICTIONS ON TRADES IN SECURITIES RELATED IN VALUE. The restrictions
applicable to the transactions in securities by disinterested directors shall
similarly apply to securities that are issued by the same issuer and whose value
or return is related, in whole or in part, to the value or return of the
security purchased or sold by the Fund (see Section 4.A.5.).
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SECTION 5 - EXEMPTED TRANSACTIONS/SECURITIES
The Fund has determined that the following securities transactions do not
present the opportunity for improper trading activities that Rule 17j-1 is
designed to prevent; therefore, the restrictions set forth in Section 4 of this
Code (including preclearance, prohibition on short-term profits and blackout
periods) shall not apply.
A. Purchases or sales in an account over which the employee has no direct or
indirect influence or control (e.g., an account managed on a fully discretionary
basis by an investment adviser or trustee).
B. Purchases or sales of direct obligations of the U.S. Government.
C. Purchases or sales of open-end investment companies (including money market
funds), variable annuities and unit investment trusts. (However, unit investment
trusts traded on a stock exchange (e.g., MITS, DIAMONDS, NASDAQ 100, etc.) must
be precleared.)
D. Purchases or sales of bank certificates, bankers acceptances, commercial
paper and other high quality short-term debt instruments, including repurchase
agreements.
E. Purchases or sales of employer stock purchased and sold through
employer-sponsored benefit plans in which the employee or spouse of the Fund
employee may participate (e.g., employee stock purchase plans or 401(k) plans)
and sales of employer stock (or the exercise of stock options) that is received
as compensation by the Fund employee or the employee's spouse.
F. Purchases or sales which are non-volitional on the part of the employee
(e.g., an in-the-money option that is automatically exercised by a broker; a
security that is called away as a result of an exercise of an option; or a
security that is sold by a broker, without employee consultation, to meet a
margin call not met by the employee).
G. Purchases which are made by reinvesting cash dividends pursuant to an
automatic dividend reinvestment plan.
H. 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 such rights were
acquired from such issuer.
I. Purchases or sales of commodities, futures (including currency futures and
futures on broad-based indices), options on futures and options on broad-based
indices. Currently, "broad-based indices" include only the S&P 100, S&P 500,
FTSE 100 and Nikkei 225. Also exempted are exchange-traded securities which are
representative of, or related closed in value to, these broad-based indices.
J. The receipt of a bona fide gift of securities. (Donations of securities,
however, require preclearance.)
THE REPORTING REQUIREMENTS LISTED IN SECTION 6 OF THIS CODE, HOWEVER, SHALL
APPLY TO THE SECURITIES AND TRANSACTION TYPES SET FORTH IN PARAGRAPHS F-J OF
THIS SECTION.
SECTION 6 - REPORTING BY EMPLOYEES
The requirements of this Section 6 apply to all Fund employees. The requirements
will also apply to all transactions in the accounts of spouses, dependent
relatives and members of the same household, trustee and custodial accounts or
any other account in which the employee has a financial interest or over which
the employee has investment discretion. The requirements do not apply to
securities acquired for accounts over which the employee has no direct or
indirect control or influence.
Employees who effect reportable transactions outside of a brokerage account
(e.g., optional purchases or sales through an automatic investment program
directly with an issuer) will be deemed to have complied with this requirement
by preclearing transactions with the Compliance Department and by reporting
their holdings annually on the "Personal Securities Holdings" form, as required
by the Compliance Department.
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A. INITIAL HOLDINGS REPORT. Each new Fund employee will be given a copy of this
Code of Ethics upon commencement of employment. All new employees must disclose
their personal securities holdings to the Compliance Department within 10 days
of commencement of employment with the Fund. (Similarly, securities holdings of
all new related accounts must be reported to the Compliance Department within 10
days of the date that such account becomes related to the employee.) With
respect to exempt securities referred to in Section 5 which do not require
preclearance/reporting, employees must nonetheless initially report those exempt
securities defined in Section 5.F.-J. (This reporting requirement does not apply
to holdings that are the result of transactions in exempt securities as defined
in Section 5.A.-E.) Initial holdings reports must identify the title, number of
shares, and principal amount with respect to each security holding. Within 10
days of commencement of employment, each employee shall file an Acknowledgement
stating that he or she has read and understands the provisions of the Code.
B. RECORDS OF SECURITIES TRANSACTIONS. All employees must preclear each
securities transaction (with the exception of exempt transactions in Section 5)
with the Compliance Department or preclearance designee. At the time of
preclearance, the employee must provide a complete description of the security
and the nature of the transaction..
C. ANNUAL HOLDINGS REPORT. All employees must submit an annual holdings report
reflecting holdings as of a date no more than 30 days before the report is
submitted..
With respect to exempt securities referred to in Section 5 which do not require
preclearance/reporting, employees must nonetheless annually report the holdings
of those exempt securities that are defined in Section 5.F.-J. (This reporting
requirement, however, does not apply to exempt securities as defined in Section
5.A.-E.)
D. ANNUAL CERTIFICATION OF COMPLIANCE. All Fund employees must certify annually
to the Compliance Department that (1) they have read and understand and agree to
abide by this Code of Ethics; (2) they have complied with all requirements of
the Code of Ethics, except as otherwise notified by the Compliance Department
that they have not complied with certain of such requirements; and (3) they have
reported all transactions required to be reported under the Code of Ethics.
E. REVIEW OF TRANSACTIONS AND HOLDINGS REPORTS. All transactions reports and
holdings reports will be reviewed by department heads (or their designees) or
compliance personnel according to procedures established by the Compliance
Department.
SECTION 7 - REPORTING BY DISINTERESTED DIRECTORS OF THE FUND
A disinterested director of the Fund need only report a transaction in a
security if the director, at the time of that transaction, knew or, in the
ordinary course of fulfilling the official duties of a director the Fund, should
have known that, during the 15-day period immediately preceding the date of the
transaction by the director, the security was purchased or sold by the Fund or
was being considered for purchase or sale by the Fund . In reporting such
transactions, disinterested directors must provide: the date of the transaction,
a complete description of the security, number of shares, principal amount,
nature of the transaction, price, commission, and name of broker/dealer through
which the transaction was effected.
As indicated in Section 6.D. for the Fund employees, disinterested directors are
similarly required to certify annually to the Compliance Department that (1)
they have read and understand and agree to abide by this Code of Ethics; (2)
they have complied with all requirements of the Code of Ethics, except as
otherwise reported to the Compliance Department that they have not complied with
certain of such requirements; and (3) they have reported all transactions
required to be reported under the Code of Ethics.
SECTION 8 - APPROVAL AND REVIEW BY BOARD OF MANAGERS
The Board of Managers of the Fund, including a majority of directors who are
disinterested directors, must approve this Code of Ethics. Additionally, any
material changes to this Code must be approved by the Board within six months
after adoption of any material change. The Board must base its approval of the
Code and any material changes to the Code on a determination that the Code
contains provisions reasonably necessary to prevent employees from engaging in
any conduct prohibited by Rule 17j-1. Prior to approving the Code or any
material
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change to the Code, the Board must receive a certification from the Fund that it
has adopted procedures reasonably necessary to prevent employees from violating
the Code of Ethics.
SECTION 9 - REVIEW OF THE FUND ANNUAL REPORT
At least annually, the Fund must furnish to the Fund's Board of Managers, and
the Board of Managers must consider, a written report that (1) describes any
issues arising under this Code of Ethics or procedures since the last report to
the Board, including, but not limited to, information about material violations
of the Code of Ethics or procedures and sanctions imposed in response to the
material violations and (2) certifies that the Fund has adopted procedures
reasonably necessary to prevent employees from violating this Code of Ethics.
SECTION 10 - SANCTIONS
Potential violations of the Code of Ethics must be brought to the attention of
the Compliance Director or his designee, are investigated and, if appropriate,
sanctions are imposed. Upon completion of the investigation, if necessary, the
matter may also be reviewed by the Code of Ethics Review Committee which will
determine whether any further sanctions should be imposed. Sanctions may
include, but are not limited to, a letter of caution or warning, reversal of a
trade, disgorgement of a profit or absorption of costs associated with a trade,
supervisor approval to trade for a prescribed period, fine or other monetary
penalty, suspension of personal trading privileges, suspension of employment
(with or without compensation), and termination of employment.
SECTION 11 - EXCEPTIONS
An exception to any of the policies, restrictions or requirements set forth
herein may be granted only upon a showing by the employee to the Code of Ethics
Review Committee that such employee would suffer extreme financial hardship
should an exception not be granted. Should the subject of the exception request
involve a transaction in a security, a change in the employee's investment
objectives, tax strategies, or special new investment opportunities would not
constitute acceptable reasons for a waiver.
